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What changed in NETWORK-1 TECHNOLOGIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NETWORK-1 TECHNOLOGIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+157 added−155 removedSource: 10-K (2024-03-08) vs 10-K (2023-03-30)

Top changes in NETWORK-1 TECHNOLOGIES, INC.'s 2023 10-K

157 paragraphs added · 155 removed · 123 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

38 edited+3 added−2 removed32 unchanged
Biggest changeMirror Worlds Patent Portfolio Our Mirror Worlds Patent Portfolio, acquired in May 2013, consists of ten (10) U.S. patents and covers foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system. All of our patents within our Mirror Worlds Patent Portfolio have expired. The Mirror Worlds Patent Portfolio includes U.S.
Biggest changeWe also have an obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated from the patent portfolio and 17.5% of net proceeds greater than $50 million. -5- Mirror Worlds Patent Portfolio Our Mirror Worlds Patent Portfolio, acquired in May 2013, consists of ten (10) U.S. patents and covers foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system.
The America Invents Act and its implementation has increased the uncertainties and costs surrounding the enforcement of patent rights has made it more difficult to successfully enforce our patents. -8- In addition, future changes in patent law could adversely impact our business.
The America Invents Act and its implementation increased the uncertainties and costs surrounding the enforcement of patent rights has made it more difficult to successfully enforce our patents. -8- In addition, future changes in patent law could adversely impact our business.
Our 227 Patent was previously asserted in litigations against Apple Inc. and Microsoft Corporation which were settled resulting in aggregate payments to us of $29,650,000. -5- The inventions relating to document stream operating systems covered by our Mirror Worlds Patent Portfolio resulted from the work done by Yale University computer scientist, Professor David Gelernter, and his then graduate student, Dr.
Our 227 Patent was previously asserted in litigations against Apple Inc. and Microsoft Corporation which were settled resulting in aggregate payments to us of $29,650,000. The inventions relating to document stream operating systems covered by our Mirror Worlds Patent Portfolio resulted from the work done by Yale University computer scientist, Professor David Gelernter, and his then graduate student, Dr.
As a result of the financing, we recognized a gain of $3,883,000 on our equity investment and a gain of $271,000 with respect to the conversion of our convertible note in the principal amount of $1,000,000 plus interest into equity of ILiAD. -9- Corporate Information We were incorporated under the laws of the State of Delaware in July 1990.
As a result of the financing, we recognized a gain in 2022 of $3,883,000 on our equity investment and a gain of $271,000 with respect to the conversion of our convertible note in the principal amount of $1,000,000 plus interest into equity of ILiAD. -9- Corporate Information We were incorporated under the laws of the State of Delaware in July 1990.
Many of these competitors have significantly greater financial and human resources than us. We may also compete with litigation funding firms such as Burford Capital Limited, Validity Finance, LLC, Fortress Investment Group, LLC, Parabellum Capital LLC and Bentham Capital LLC, venture capital firms and hedge funds for intellectual property acquisitions and licensing opportunities.
We may also compete with litigation funding firms such as Burford Capital Limited, Validity Finance, LLC, Fortress Investment Group, LLC, Parabellum Capital LLC and Bentham Capital LLC, venture capital firms and hedge funds for intellectual property acquisitions and licensing opportunities. Many of these competitors also have greater financial resources and human resources than us.
You may obtain, free of charge on our Internet website, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
You may obtain, free of charge on our Internet website, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, Section 16 filings and amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
Investment in ILiAD Biotechnologies During the period December 2018 to date, we made an aggregate investment of $7,000,000 in ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention and treatment of human disease caused by Bordetella pertussis . ILiAD is currently focused on validating its proprietary intranasal vaccine, BPZE1, for the prevention of pertussis (whooping cough).
Investment in ILiAD Biotechnologies During the period December 2018 to date, we made aggregate investments of $7,000,000 in ILiAD, a privately held clinical stage biotechnology company dedicated to the prevention and treatment of human disease caused by Bordetella pertussis . ILiAD is currently focused on validating its proprietary intranasal vaccine, BPZE1, for the prevention of pertussis (whooping cough).
Since entering into the agreement with Recognition in May 2013, we have paid Recognition an aggregate of $3,127,000 with respect to such net proceeds interest in our Mirror Worlds Patent Portfolio (no such payments were made during the years 2022 and 2021). Remote Power Patent Our Remote Power Patent (U.S.
Since entering into the agreement with Recognition in May 2013, we have paid Recognition an aggregate of $3,127,000 with respect to such net proceeds interest in our Mirror Worlds Patent Portfolio (no such payments were made during the years 2023 and 2022). Remote Power Patent Our Remote Power Patent (U.S.
Since acquisition of our Mirror Worlds Patent Portfolio in May 2013, we have received licensing and other revenue of $47,150,000 through December 31, 2022. In addition, we may enter into third party strategic relationships with inventors and patent owners to assist in the development and monetization of their patent technologies.
Since the acquisition of our Mirror Worlds Patent Portfolio in May 2013, we have received licensing and other revenue of $47,150,000 through December 31, 2023. In addition, we may enter into third party strategic relationships with inventors and patent owners to assist in the development and monetization of their patent technologies.
The SEC also maintains an Internet site that contains reports, proxy and other information statements, and other information regarding issuers, including us, that file electronically with the SEC. The address of the SEC’s Internet site is http://www.sec.gov . Employees and Consultants We currently have two employees and two consultants providing monthly services to us.
The SEC also maintains an Internet site that contains reports, proxy and other information statements, and other information regarding issuers, including us, that file electronically with the SEC. The address of the SEC’s Internet site is http://www.sec.gov . Employees and Consultants We currently have two full-time employees and two consultants providing monthly services to us.
Nix is an entrepreneur and inventor, and founder and Chief Executive Officer of Vobal Technologies, LLC. In 2016, Mr. Nix was recognized as “Creator of the Year” by the Intellectual Property Law Association of Chicago for his intellectual property related to embedded SIM technology. HFT Patent Portfolio On March 25, 2022, we acquired the HFT Patent Portfolio.
Nix is an entrepreneur and inventor, and founder and Chief Executive Officer of Vobal Technologies, LLC. In 2016, Mr. Nix was recognized as “Creator of the Year” by the Intellectual Property Law Association of Chicago for his intellectual property related to eSIM technology. HFT Patent Portfolio On March 25, 2022, we acquired the HFT Patent Portfolio.
Our current patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as has been the case with our Remote Power Patent and Mirror Worlds Patent Portfolio. Our Remote Power Patent has generated licensing revenue in excess of $187,000,000 from May 2007 through December 31, 2022.
Our current patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as has been the case with our Remote Power Patent and Mirror Worlds Patent Portfolio. Our Remote Power Patent has generated licensing revenue in excess of $188,000,000 from May 2007 through December 31, 2023.
We anticipate further issuances of additional claims for this portfolio. The expiration dates of the thirty-four (34) issued U.S. patents currently within our M2M/IoT Patent Portfolio range from September 2033 to May 2034.
We anticipate further issuances of additional claims for this portfolio. The expiration dates of the thirty-seven (37) issued U.S. patents currently within our M2M/IoT Patent Portfolio range from September 2033 to May 2034.
We are obligated to pay Dr. Cox 12.5% of the net proceeds generated by us from licensing, sale or enforcement of the Cox Patent Portfolio. Dr. Cox provides consulting services to us with respect to the Cox Patent Portfolio and assists our efforts to develop the patent portfolio. Dr.
Cox 12.5% of the net proceeds generated by us from licensing, sale or enforcement of the Cox Patent Portfolio. Dr. Cox provides consulting services to us with respect to the Cox Patent Portfolio and assists our efforts to develop the patent portfolio. Dr.
In addition, we review opportunities to acquire or license additional intellectual property as well as other strategic alternatives. We have invested $7,000,000 in ILiAD Biotechnologies, LLC (“ILiAD”), a clinical stage biotechnology company with an exclusive license to sixty-four (64) patents.
In addition, we review opportunities to acquire or license additional intellectual property as well as other strategic alternatives. We have invested $7,000,000 in ILiAD Biotechnologies, LLC (“ILiAD”), a clinical stage biotechnology company with an exclusive license to seventy (70) patents.
We presently own ninety-seven (97) U.S. patents, fifty-two (52) of such patents have expired, and eight foreign patents relating to (i) our Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed after such identification; (ii) our M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to, among other -2- things, enabling technology for authenticating, provisioning and using embedded Sim (Subscriber Identification Module) technology in next generation IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers; (iii) our HFT patent portfolio (the “HFT Patent Portfolio”) covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds patent portfolio (the “Mirror Worlds Patent Portfolio”) relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our remote power patent (the “Remote Power Patent”) covering the delivery of Power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.
We presently own one hundred (100) U.S. patents, fifty-four (54) of such patents have expired, and fifteen (15) foreign patents relating to (i) our Cox patent portfolio (the “Cox Patent Portfolio”) relating to enabling technology for identifying media content on the Internet and taking further actions to be performed after such identification;(ii) our M2M/IoT patent portfolio (the “M2M/IoT Patent Portfolio”) relating to, -2- among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (iii) our HFT patent portfolio (the “HFT Patent Portfolio”) covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds patent portfolio (the “Mirror Worlds Patent Portfolio”) relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our remote power patent (the “Remote Power Patent”) covering the delivery of Power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.
He is an inventor or co-inventor of over seventy (70) U.S. patents. -4- M2M/IoT Patent Portfolio Our M2M/IoT Patent Portfolio, acquired in December 2017 from M2M and IoT Technologies, LLC (“M2M”), relates to, among other things, enabling technology for authenticating, provisioning and using embedded SIM technology in next generation IoT, Machine-to-Machine and other mobile devices including smartphones, tablets and computers as well as automobiles and drones.
He is an inventor or co-inventor of over seventy (70) U.S. patents. -4- M2M/IoT Patent Portfolio Our M2M/IoT Patent Portfolio, acquired in December 2017 from M2M and IoT Technologies, LLC (“M2M”), relates to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices including smartphones, tablets and computers, as well as automobiles.
Ingemar Cox in February 2013, currently consists of thirty-nine (39) U.S. patents relating to enabling technology for identifying media content on the Internet, such as audio and video, and taking further actions to be performed based on such identification.
Ingemar Cox in February 2013, currently consists of thirty-nine (39) U.S. patents relating to enabling technology for identifying media content on the Internet, such as audio and video, and taking further actions to be performed based on such identification. All of the patents within our Cox patent portfolio have expired.
On December 31, 2022, we owned approximately 6.8% of the outstanding units of ILiAD on a non-fully diluted basis and 6.3% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options and warrants). Our current strategy includes continuing our efforts to monetize our intellectual property.
On December 31, 2023, we owned approximately 6.7% of the outstanding units of ILiAD on a non-fully diluted basis and 5.4% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options and warrants). Our current strategy includes continuing our efforts to monetize our intellectual property.
Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the foreseeable future. -3- Overview of Our Patents We currently own ninety-seven (97) U.S. patents and eight foreign patents relating to patents within our Cox Patent Portfolio, M2M/IoT Patent Portfolio, HFT Patent Portfolio, Mirror World Patent Portfolio and our Remote Power Patent.
Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the foreseeable future. -3- Overview of Our Patents We currently own one hundred (100) U.S. patents and fifteen(15) foreign patents relating to patents within our Cox Patent Portfolio, M2M/IoT Patent Portfolio, HFT Patent Portfolio, Mirror World Patent Portfolio and our Remote Power Patent.
On December 31, 2022, we owned approximately 6.8% of the outstanding units of ILiAD on a non-fully diluted basis and 6.3% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options, and warrants).
On December 31, 2023, we owned approximately 6.7% of the outstanding units of ILiAD on a non-fully diluted basis and 5.4% of the outstanding units on a fully diluted basis (after giving effect to the exercise of all outstanding options, and warrants).
(formerly Facebook, Inc.) involving certain patents within our Mirror Worlds Patent Portfolio (see “Legal Proceedings” at pages 19-21 of this Annual Report). At December 31, 2022, we had cash and cash equivalents and marketable securities of $48,439,000 and working capital of $47,359,000.
(formerly Facebook, Inc.) involving certain patents within our Mirror Worlds Patent Portfolio (see “Legal Proceedings” at pages 19 - 21 of this Annual Report). At December 31, 2023, we had cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000.
In addition, we may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. We have been dependent upon our Remote Power Patent for a significant portion of our revenue.
In addition, we may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property. We have been dependent upon our Remote Power Patent for a significant portion of our revenue. Our Remote Power Patent has generated revenue in excess of $188,000,000 from May 2007 through December 31, 2023.
The patents within our Cox Patent Portfolio are based on a patent application filed in 2000. Since the acquisition of the Cox Patent Portfolio in February 2013, we have been issued thirty-four (34) additional patents relating to this portfolio. The claims in these thirty-four (34) additional patents are generally directed towards systems of content identification and performing actions following therefrom.
Since the acquisition of the Cox Patent Portfolio in February 2013, we have been issued thirty-four (34) additional patents relating to this portfolio. The claims in these thirty-four (34) additional patents are generally directed towards systems of content identification and performing actions following therefrom. We are obligated to pay Dr.
Patent No. 6,006,227 (the “227 Patent”), U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 which are currently being asserted in our litigation against Meta Platforms, Inc. (formerly Facebook, Inc.) (see “Legal Proceedings” at pages 19-20 hereof).
All of our patents within our Mirror Worlds Patent Portfolio have expired. The Mirror Worlds Patent Portfolio includes U.S. Patent No. 6,006,227 (the “227 Patent”), U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 which are currently being asserted in our litigation against Meta Platforms, Inc. (formerly Facebook, Inc.) (see “Legal Proceedings” at page 20 hereof).
With respect to our ninety-seven (97) U.S. patents, fifty-two (52) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the expiration date.
With respect to our one hundred (100) U.S. patents, fifty-four (54) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the expiration date.
The M2M/IoT Patent Portfolio currently consists of thirty-four (34) issued U.S. patents, four pending U.S. patent applications, seven registered foreign patents and seven additional pending non-U.S. patent applications. Since we acquired the M2M/IoT Patent Portfolio in December 2017, we have been issued twenty-two (22) additional U.S. patents with respect to the portfolio.
The M2M/IoT Patent Portfolio currently consists of thirty-seven (37) issued U.S. patents, nine (9) pending U.S. patent applications, fourteen (14) registered foreign patents and one (1) additional pending non-U.S. patent applications. Since we acquired the M2M/IoT Patent Portfolio in December 2017, we have been issued twenty-three (23) additional U.S. patents with respect to the portfolio.
We have previously successfully asserted litigation with respect to our Remote Power Patent and our Mirror Worlds Patent Portfolio and have also been successful in defending proceedings at the USPTO challenging the validity of our Remote Power Patent and certain patents within our Cox Patent Portfolio. -7- Significant Licensees We had no revenue for the year ended December 31, 2022.
We have previously successfully asserted litigation with respect to our Remote Power Patent and our Mirror Worlds Patent Portfolio and have also been successful in defending proceedings at the USPTO challenging the validity of our Remote Power Patent and certain patents within our Cox Patent Portfolio. -7- Revenue Concentration Revenue from our Remote Power Patent as a result of litigation settlements constituted 100% of our revenue for the year ended December 31, 2023, of which four defendants constituted 90% of our revenue for such year.
We no longer receive licensing revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent). Our future revenue is largely dependent on our ability to monetize our other patent assets.
We no longer receive revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent).
The patent licensing and enforcement industry has grown and there has been a material increase in the number of companies seeking to acquire intellectual property assets from third parties or to provide financing to third parties seeking to monetize their intellectual property. Entities including, among others, Acacia Research Corporation (NASDAQ:ACTG), Intellectual Ventures, WI-LAN Inc., a subsidiary of Quarterhill Inc.
The patent licensing and enforcement industry has grown and there has been a material increase in the number of companies seeking to acquire intellectual property assets from third parties or to provide financing to third parties seeking to monetize their intellectual property.
Eric Freeman, in the mid-1990s. Certain aspects of the technologies developed by David Gelernter were commercialized in their company's product offering called “Scopeware.” Technologies embodied in Scopeware are now common in various computer and web-based operating systems. Professor Gelernter and Dr. Freeman each entered into consulting agreements with us as part of our acquisition of the Mirror Worlds Patent Portfolio.
Eric Freeman, in the mid-1990s. Certain aspects of the technologies developed by David Gelernter were commercialized in their company's product offering called “Scopeware.” Technologies embodied in Scopeware are now common in various computer and web-based operating systems.
BPZE1 is a live-attenuated intranasal vaccine designed to overcome deficiencies of current pertussis vaccines, including poor durability of protection and failure to prevent nasopharyngeal Bordetella pertussis infections that lead to escape mutants and transmission to vulnerable infants. On January 3, 2022, ILiAD announced that the U.S. Food and Drug Administration (FDA) granted Fast Track designation for BPZE1.
BPZE1 is a live-attenuated intranasal vaccine designed to overcome deficiencies of current pertussis vaccines, including poor durability of protection and failure to prevent nasopharyngeal Bordetella pertussis infections that lead to escape mutants and transmission to vulnerable infants.
(NASDAQ:QTRH), VirnetX Holdings Corporation (NYSE MKT:VHC) and RPX Corporation, seek to acquire intellectual property or partner with third parties to license or enforce intellectual property rights. In addition, we also compete with strategic corporate buyers with respect to the acquisition of intellectual property assets. It is expected that others will enter this market as well.
Entities including, among others, Acacia Research Corporation (NASDAQ:ACTG), Intellectual Ventures, WI-LAN Inc., VirnetX Holdings Corporation (NYSE MKT:VHC) and RPX Corporation, seek to acquire intellectual property or partner with third parties to license or enforce intellectual property rights. In addition, we also compete with strategic corporate buyers with respect to the acquisition of intellectual property assets.
In connection with our investment, Corey Horowitz, our Chairman and Chief Executive Officer, became a member of ILiAD’s Board of Managers. BPZE1 was developed in the laboratory of Camille Locht, PhD, at the Institut Pasteur de Lille (IPL) and French National Institute of Health and Medical research.
BPZE1 was developed in the laboratory of Camille Locht, PhD, at the Institut Pasteur de Lille (IPL) and French National Institute of Health and Medical research.
All of the patents within our Cox patent portfolio expired in September 2021 except for two patents which expire in July 2023 and November 2023. We have pending litigation against Google Inc. and YouTube, LLC involving assertion of certain patents within our Cox Patent Portfolio (see “Legal Proceedings” at page 19 hereof).
We have pending litigation against Google Inc. and YouTube, LLC involving assertion of certain patents within our Cox Patent Portfolio (see “Legal Proceedings” at pages 19 - 20 hereof). The patents within our Cox Patent Portfolio are based on a patent application filed in 2000.
Notwithstanding the expiration of the Remote Power Patent in March 2020, we are currently asserting the patent in separate actions against five defendants for damages prior to March 7, 2020 (expiration date) (see “Legal Proceedings” at page 20 hereof).
Notwithstanding the expiration of the Remote Power Patent in March 2020, in October and November 2022, we asserted the patent in nine separate actions against ten defendants for damages prior to March 7, 2020 and have reached settlement agreements with eight of the defendants (see “Legal Proceedings” at pages 20 - 21 hereof).
Many of these competitors also have greater financial resources and human resources than us.
It is expected that others will enter this market as well. Many of these competitors have significantly greater financial and human resources than us.
Pertussis is a life-threatening disease caused by the highly contagious respiratory bacterium Bordetella pertussis . According to the U.S. Centers for Disease Control and Prevention, each year pertussis affects approximately 16 million people globally, accounting for nearly 200,000 deaths. ILiAD has the exclusive license to sixty-four (64) issued patents and has thirty (30) pending patent applications.
Pertussis is a life-threatening disease caused by the highly contagious respiratory bacterium Bordetella pertussis . ILiAD has the exclusive license to seventy (70) issued patents and has forty-nine (49) pending patent applications.
Removed
We also have an obligation to pay the seller 15% of the first $50 million of net proceeds (after deduction of expenses) generated from the patent portfolio and 17.5% of net proceeds greater than $50 million.
Added
During the year ended December 31, 2023, our Remote Power Patent generated all of our revenue of $2,601,000 as a result of litigation settlements relating to periods prior to March 7, 2020 (see “Legal Proceedings at pages 20 - 21. Our future revenue is largely dependent on our ability to monetize our other patent assets.
Removed
Revenue from our Remote Power Patent constituted 100% of our revenue for the year ended December 31, 2021, of which two licensees constituted 99% of our revenue for such year.
Added
We anticipate that our future revenue will continue to be derived from a few parties.
Added
In connection with our investment, Corey Horowitz, our Chairman and Chief Executive Officer, became a member of ILiAD’s Board of Managers and receives the same compensation for service on the Board as the other non-management Board members.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

27 edited+7 added−3 removed41 unchanged
Biggest changeWe do not maintain key-man life insurance on the life of Mr. Horowitz. Cash dividends may not be continued to be paid. Our dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year.
Biggest changeThe loss of the services of Mr. Horowitz would have a material adverse effect on our business and prospects. We do not maintain key-man life insurance on the life of Mr. Horowitz. -13- Cash dividends may not be continued to be paid.
This concentration of ownership will limit other stockholders' ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us. Our common stock may be delisted from the NYSE American exchange if we fail to comply with continued listing standards.
This concentration of ownership will limit other stockholders' ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us. -16- Our common stock may be delisted from the NYSE American exchange if we fail to comply with continued listing standards.
Many of these competitors have greater financial resources and human resources than us. Our markets are subject to rapid technological change and our technologies face potential technology obsolescence. The markets covered by our intellectual property are characterized by rapid technological changes, changing customer requirements, frequent new product introductions and enhancements, and evolving industry standards.
Many of these competitors have greater financial resources and human resources than us. -15- Our markets are subject to rapid technological change and our technologies face potential technology obsolescence. The markets covered by our intellectual property are characterized by rapid technological changes, changing customer requirements, frequent new product introductions and enhancements, and evolving industry standards.
In addition, we may not be able to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property and, even if we consummate such strategic relationships, we may not achieve material revenue or profit from such relationships. -12- The patent monetization cycle is long, costly and unpredictable.
In addition, we may not be able to enter into strategic relationships with third parties to license or otherwise monetize their intellectual property and, even if we consummate such strategic relationships, we may not achieve material revenue or profit from such relationships. The patent monetization cycle is long, costly and unpredictable.
The introduction of products embodying new technologies and the emergence of new industry standards may render our technologies obsolete or less marketable. -15- In addition, other companies may develop competing technologies that offer better or less expensive alternatives to the technologies covered by our intellectual property.
The introduction of products embodying new technologies and the emergence of new industry standards may render our technologies obsolete or less marketable. In addition, other companies may develop competing technologies that offer better or less expensive alternatives to the technologies covered by our intellectual property.
As a result of the expiration of our Remote Power Patent on March 7, 2020, we no longer receive licensing revenue from such patent for any period subsequent to the expiration date.
As a result of the expiration of our Remote Power Patent on March 7, 2020, we no longer receive revenue from such patent for any period subsequent to the expiration date.
Furthermore, the outcome of our efforts to monetize our patents is uncertain and we may not be successful. Our quarterly and annual operating and financial results and our revenue are difficult to predict and are likely to fluctuate significantly in future periods.
Furthermore, the outcome of our efforts to monetize our patents is uncertain and we may not be successful. -12- Our quarterly and annual operating and financial results, including our revenue, are difficult to predict and are likely to fluctuate significantly in future periods.
In general, it addressed issues surrounding the enforceability of patents and the increase in patent litigation by, among other things, established new procedures for patent litigation and new administrative post-grant review procedures to challenge the patentability of issued patents outside of litigation, including Inter Partes Review (IPR) and Covered Business Method Review (CBM) proceedings which provide third parties a timely, cost effective alternative to district court litigation to challenge the validity of an issued patent.
In general, it addressed issues surrounding the enforceability of patents and the increase in patent litigation by, among other things, established new procedures for patent litigation and new administrative post-grant review procedures to challenge the patentability of issued patents outside of litigation, including Inter Partes Review (IPR) proceedings, which provide third parties a timely, cost effective alternative to district court litigation to challenge the validity of an issued patent.
If any of the following risks actually occur, our business, financial condition, results of operations and cash flow could be materially adversely affected, and the trading price of our common stock could decline significantly. -10- Risks Related to Our Business Our revenue from licensing intellectual property is uncertain as it is generally dependent upon litigation outcomes involving our patents which we cannot predict.
If any of the following risks actually occur, our business, financial condition, results of operations and cash flow could be materially adversely affected, and the trading price of our common stock could decline significantly. -10- Risks Related to Our Business Our revenue is uncertain as it is dependent upon litigation outcomes involving our patents which we cannot predict.
The preparation of financial statements in accordance with accounting principles generally accepted in the Unites States (“U.S. GAAP”) involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenues, expenses, and income.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States involves making estimates, judgments and assumptions that affect reported amounts of assets (including intangible assets), liabilities and related reserves, revenues, expenses, and income.
During the second half of 2022, based on available information concerning our shareholder ownership, we did not satisfy the Ownership Test and thus we were not a PHC for 2022. However, we may be determined to be a PHC in the future.
During the second half of 2023, based on available information concerning our shareholder ownership, we did not satisfy the Ownership Test. In addition, we did not satisfy the Income Test for 2023. Thus, we were not a PHC for 2023. However, we may be determined to be a PHC in the future.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also have a material and adverse effect on the market price of our common stock. -18- ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also have a material and adverse effect on the market price of our common stock. -18-
The market price of our common stock may be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following: • the outcome of our litigation against Google and YouTube involving certain patents within our Cox Patent Portfolio; • our ability to further develop, license and monetize our M2M/IoT Patent Portfolio; • our ability to further develop, license and monetize our HFT Patent Portfolio; • our ability to achieve a successful outcome of our investment in ILiAD; • the outcome of our appeal to the Federal Circuit of the District Court ruling granting Facebook summary judgment of non-infringement and dismissing our case involving certain patents within our Mirror Worlds Patent Portfolio; • our ability to acquire additional intellectual property; • 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 continue to pay cash dividends; • 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.
The market price of our common stock may be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including, but not limited to, the following: • the outcome of our litigation against Google and YouTube involving certain patents within our Cox Patent Portfolio; • our ability to further develop, license and monetize our M2M/IoT Patent Portfolio; • our ability to further develop, license and monetize our HFT Patent Portfolio; • our ability to achieve a successful outcome of our investment in ILiAD; • our ability to acquire additional intellectual property; • 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 continue to pay cash dividends; • 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.
Based upon the success we achieved from licensing our Remote Power Patent (twenty-eight (28) license agreements which generated in excess of $187,000,000 of revenue), the revenue we generated from our Mirror Worlds Patent Portfolio ($47,150,000) and establishing a patent portfolio currently consisting of ninety-seven (97) U.S. patents and eight foreign patents as well as our cash position, we believe we have the expertise and sufficient capital to compete in the patent monetization market and to enter strategic relationships with third parties to develop, commercialize, license or otherwise monetize their patents.
Based upon the success we achieved from licensing our Remote Power Patent (twenty-eight (28) license agreements and in excess of $188,000,000 of revenue through December 31, 2023), the revenue we generated from our Mirror Worlds Patent Portfolio ($47,150,000) and establishing a patent portfolio currently consisting of one hundred (100) U.S. patents and fifteen (15) foreign patents as well as our cash position, we believe we have the expertise and sufficient capital to compete in the patent monetization market and to enter strategic relationships with third parties to develop, commercialize, license or otherwise monetize their patents.
Such delisting could adversely affect the price and trading (including liquidity) of our common stock. -16- There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition, and operating results.
There are inherent uncertainties involved in estimates, judgments and assumptions used in the preparation of financial statements in accordance with U.S. GAAP. Any changes in estimates, judgments and assumptions could have a material adverse effect on our business, financial condition, and operating results.
As of March 10, 2023, our executive officers and directors beneficially owned 30.8% of our outstanding common stock. As a result, these stockholders may be able to exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets.
As a result, these stockholders may be able to exercise substantial control over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets.
Our common stock is currently traded on the NYSE American exchange under the symbol “NTIP”. If we fail to meet any of the continued listing standards of the NYSE American exchange, our common stock could be delisted.
Our common stock is currently traded on the NYSE American exchange under the symbol “NTIP”. If we fail to meet any of the continued listing standards of the NYSE American exchange, our common stock could be delisted. Such delisting could adversely affect the price and trading (including liquidity) of our common stock.
To date we have invested $7,000,000 in ILiAD, a privately held clinical stage biotechnology company, with focus on validating its proprietary intranasal vaccine (BPZE1) for the prevention of pertussis (whopping cough).
To date we have invested $7,000,000 in ILiAD, a privately held clinical stage biotechnology company, with focus on validating its proprietary intranasal vaccine (BPZE1) for the prevention of pertussis (whopping cough). Notwithstanding the aforementioned, ILiAD still faces material risks going forward. Accordingly, our investment in ILiAD remains subject to substantial risks.
We are currently enforcing certain patents within our Cox Patent Portfolio against Google and YouTube, who are challenging these patents and we are also asserting our Remote Power Patent in nine separate litigations against ten defendants.
We are currently enforcing certain patents within our Cox Patent Portfolio against Google and YouTube, who are challenging these patents and we are also asserting our Remote Power Patent against Ubiquity Inc. and Honeywell International Inc.
Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. In 2022, we had no revenue and incurred a net loss of $2,326,000. We had revenue of $36,029,000 and net income of $14,281,000 for 2021, as compared to revenue of $4,403,000 and a net loss of $1,709,000 for 2020.
Our quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period to period. In 2023, we had revenue of $2,601,000 and incurred a net loss of $1,457,000. In 2022, we had no revenue and incurred a net loss of $2,326,000.
Our Remote Power Patent has generated licensing revenue for us in excess of $187,000,000 from May 2007 through December 31, 2022. We had no revenue in 2022 and revenue from our Remote Power Patent constituted 100% of our revenue for 2021 ($36,029,000), 2020 ($4,403,000) and 2019 ($3,037,000).
Revenue from our Remote Power Patent constituted 100% of our revenue ($2,601,000) for 2023. We had no revenue in 2022 and revenue from our Remote Power Patent constituted 100% of our revenue for 2021 ($36,029,000), 2020 ($4,403,000) and 2019 ($3,037,000).
We have paid such semi-annual dividends since our dividend policy was enacted in December 2016. At this time we anticipate continuing to pay dividends consistent with our policy.
Our dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year. We have paid such semi-annual dividends since our dividend policy was enacted in December 2016. At this time, we anticipate continuing to pay dividends consistent with our policy.
On March 22, 2022, we entered into a new four year employment agreement with Mr. Horowitz pursuant to which he continues to serve as our Chairman and Chief Executive Officer. The loss of the services of Mr. Horowitz would have a material adverse effect on our business and prospects.
Our success is largely dependent upon the personal efforts of Corey M. Horowitz, our Chairman, Chief Executive Officer and Chairman of our Board of Directors. On March 22, 2022, we entered into a new four year employment agreement with Mr. Horowitz pursuant to which he continues to serve as our Chairman and Chief Executive Officer.
Notwithstanding the gains we recorded in 2022, our investment in ILiAD remains subject to substantial risks. We have been dependent upon our Remote Power Patent for a significant portion of our revenue and we may not be able to generate future revenue from our other patents.
We have been dependent upon our Remote Power Patent for a significant portion of our revenue and we may not be able to generate future revenue from our other patents. Our Remote Power Patent has generated revenue for us in excess of $188,000,000 from May 2007 through December 31, 2023.
If we were determined to be a PHC in 2023 or any future year, we would be subject to an additional 20% tax on our UPHCI.
If we were determined to be a PHC in 2024 or any future year, we would be subject to an additional 20% tax on our UPHCI. In such event, we may issue a special cash dividend to our shareholders in an amount equal to the UPHCI rather than incur the 20% tax. We are dependent upon our CEO and Chairman.
We had revenue of $3,037,000 and a net loss of $1,792,000 for 2019 as compared to revenue and net income of $22,106,000 and $7,706,000 for 2018.
We had revenue of $36,029,000 and net income of $14,281,000 for 2021, as compared to revenue of $4,403,000 and a net loss of $1,709,000 for 2020.
The America Invents Act and its implementation also increased the uncertainties and costs surrounding the enforcement of patent rights, which could have a material adverse effect on our business, financial condition and results of operations. -14- Changes in patent law could adversely impact our business.
The America Invents Act and its implementation also increased the uncertainties and costs surrounding the enforcement of patent rights, which have made it more difficult to successfully prosecute our patents. The increasing development of artificial intelligence could materially impact our business.
Removed
For the year ended December 31, 2022, we recorded a gain of $3,883,000 on our ILiAD investment in accordance with Accounting Standards Codification (ASC) 323 as a result of ILiAD’s completion of a private financing of approximately $42,800,000 in August 2022 which included an investment of $30,000,000 by a multi-national pharmaceutical company.
Added
Our patents are central to our business strategy of licensing our intellectual property rights or enforcing such rights against those that we believe are infringing. However, rapid advancements in the field of artificial intelligence (AI) and machine learning (ML) have the potential to disrupt our current business model in various ways.
Removed
We also recorded a gain in 2022 of $271,000 in connection with conversion of our convertible note in the principal amount of $1,000,000 plus accrued interest into equity in the ILiAD private offering (see Note B[6] and Note H to our consolidated financial statements included herein).
Added
AI technologies are increasingly capable of developing solutions that either design around existing patents or create alternative technologies that may not infringe on our intellectual property. As AI evolves, it may accelerate the pace at which our patents become obsolete or irrelevant, reducing our ability to monetize our patent portfolio effectively.
Removed
In such event, we may issue a special cash dividend to our shareholders in an amount equal to the UPHCI rather than incur the 20% tax. -13- We are dependent upon our CEO and Chairman. Our success is largely dependent upon the personal efforts of Corey M. Horowitz, our Chairman, Chief Executive Officer and Chairman of our Board of Directors.
Added
Furthermore, the proliferation of AI may lead to the emergence of new market participants with innovative solutions that challenge our patents' validity or enforceability.
Added
Such challenges could result in lengthy legal battles or the invalidation of our patents, thereby impacting our potential future revenue. -14- AI driven legal analytics tools can also empower potential infringers with sophisticated insights into the strengths and weaknesses of our patent claims, potentially reducing our leverage in litigation and licensing negotiations.
Added
The integration of AI technologies into the products and services of the companies we may assert claims against could also complicate infringement analyses and legal arguments, potentially affecting the outcomes of our enforcement actions.
Added
Investors are advised that our financial results could be adversely affected if we are unable to adapt to the rapid changes brought about by AI and ML technologies, and our ability to enforce our patent rights is consequently diminished. Changes in patent law could adversely impact our business.
Added
As of February 15 , 2024, our executive officers and directors beneficially owned 32% of our outstanding common stock.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that our office facility is suitable and appropriate to support our current needs.
Biggest changeOn September 29, 2023, we exercised our early termination right under the lease to terminate the lease on December 31, 2023, which has been extended to March 31, 2024. We believe that our office facility is suitable and appropriate to support our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRemote Power Patent Litigation October-November 2022 Litigation In October and November 2022, we initiated nine separate litigations against ten defendants for infringement of our Remote Power Patent seeking monetary damages based upon reasonable royalties, as follows: • On October 6, 2022, we initiated such litigation against Arista Networks, Inc., Fortinet, Inc., Honeywell International Inc. and Ubiquiti Inc. in the United States District Court, District of Delaware; • On October 27, 2022, and November 3, 2022, we initiated such litigation against TP-Link USA Corporation and Hikvision USA, Inc. in the United States District Court for the Central District of California; • On November 4, 2022, we initiated such litigation against Panasonic Holdings Corporation and Panasonic Corporation of North America in the United States District Court for the Eastern District of Texas (Marshall Division); and • On November 8, 2022 and November 16, 2022, we initiated such litigation against Antaira Technologies, LLC and Dahua Technology USA in the United States District Court for the Central District of California.
Biggest changeRemote Power Patent Litigation October-November 2022 Litigation In October and November 2022, we initiated nine separate litigations against ten defendants for infringement of our Remote Power Patent seeking monetary damages based upon reasonable royalties, as follows: (i) on October 6, 2022, we initiated such litigation against Arista Networks, Inc., Fortinet, Inc., Honeywell International Inc. and Ubiquiti Inc. in the United States District Court, District of Delaware; (ii) on October 27, 2022, and November 3, 2022, we initiated such litigation against TP-Link USA Corporation and Hikvision USA, Inc. in the United States District Court for the Central District of California;(iii) on November 4, 2022, we initiated such litigation against Panasonic Holdings Corporation and Panasonic Corporation of North America in the United States District Court for the Eastern District of Texas (Marshall Division); and (iv) on November 8, 2022 and November 16, 2022, we initiated such litigation against Antaira Technologies, LLC and Dahua Technology USA in the United States District Court for the Central District of California. -20- During the year ended December 31, 2023, we entered into settlement agreements with Arista Networks, Inc., Antaira Technologies, LLC, Dahua Technology USA, Inc., Fortinet, Inc., Hikvision USA, Inc., Panasonic Holdings Corporation and TP-Link USA Corporation with respect to the above referenced litigations resulting in aggregate settlement payments to us of $2,601,000 and a conditional payment of $150,000.
In its ruling the Court (i) denied Meta’s motion that the asserted patents were invalid by concluding that all asserted claims were patent eligible under §101 of the Patent Act and (ii) granted summary judgment of non-infringement in favor of Facebook and dismissed the case.
In its ruling the Court (i) denied Meta’s motion that the asserted patents were invalid by concluding that all asserted claims were patent eligible under §101 of the Patent Act and (ii) granted summary judgment of non-infringement in favor of Meta and dismissed the case.
Court of Appeals for the Federal Circuit ruled in our favor and reversed the summary judgment finding on non-infringement of the District Court and remanded the litigation to the Southern District of New York for further proceedings. -19- On March 7, 2022, the District Court entered a ruling granting in part and denying in part a motion for summary judgment by Meta.
Court of Appeals for the Federal Circuit ruled in our favor and reversed the summary judgment finding on non-infringement of the District Court and remanded the litigation to the Southern District of New York for further proceedings.
On August 11, 2018, the Court issued an order granting Facebook’s motion for summary judgment of non-infringement and dismissed the case. On January 23, 2020, the U.S.
We seek, among other things, monetary damages based upon reasonable royalties. On August 11, 2018, the Court issued an order granting Meta’s motion for summary judgment of non-infringement and dismissed the case. On January 23, 2020, the U.S.
Pursuant to a joint stipulation and order, entered on January 2, 2019, the parties agreed, among other things, that the stays with respect to the litigations were lifted. In January 2019, the two litigations against Google and YouTube were consolidated. Discovery is complete and the parties have each submitted summary judgment motions. A trial date has not yet been set.
District Court of Appeals for the Federal Circuit. Pursuant to a joint stipulation and order, entered on January 2, 2019, the parties agreed, among other things, that the stays with respect to the litigations were lifted. In January 2019, the two litigations against Google and YouTube were consolidated.
During the period January 24, 2023 through March 10, 2023, we entered into settlement agreements with Arista Networks, Inc., Antaira Technologies, LLC, Panasonic Holdings Corporation and TP-Link USA Corporation with respect to the above referenced litigations resulting in aggregate settlement payments to us of $537,300 and a conditional payment of $150,000. -20- Netgear Litigation On December 15, 2020, we filed a lawsuit against Netgear in the Supreme Court of the State of New York, County of New York, for breach of a Settlement and License Agreement, dated May 22, 2009, with us for Netgear’s failure to make royalty payments, and provide corresponding royalty reports to us based on sales of Netgear’s PoE products.
Netgear Litigation On December 15, 2020, we filed a lawsuit against Netgear in the Supreme Court of the State of New York, County of New York, for breach of a Settlement and License Agreement, dated May 22, 2009, with us for Netgear’s failure to make royalty payments, and provide corresponding royalty reports to us based on sales of Netgear’s PoE products.
The litigations against Google and YouTube were subject to court ordered stays which were in effect from July 2, 2015 until January 2, 2019 as a result of proceedings then pending at the Patent Trial and Appeal Board (PTAB) and the appeals to the U.S. District Court of Appeals for the Federal Circuit.
The lawsuit alleges that Google and YouTube have infringed and continue to infringe certain of our patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube’s Content ID system. -19- The litigations against Google and YouTube were subject to court ordered stays which were in effect from July 2, 2015 until January 2, 2019 as a result of proceedings then pending at the Patent Trial and Appeal Board (PTAB) and appeals to the U.S.
Patent No. 8,255,439 (among the patents within our Mirror Worlds Patent Portfolio). The lawsuit alleges that the asserted patents are infringed by Meta’s core technologies that enable Meta’s Newsfeed and Timeline features. We seek, among other things, monetary damages based upon reasonable royalties. On May 7, 2018, Meta filed a motion for summary judgment on non-infringement.
District Court for the Southern District of New York, for infringement of U.S. Patent No. 6,006,227, U.S. Patent No. 7,865,538 and U.S. Patent No. 8,255,439 (among the patents within our Mirror Worlds Patent Portfolio). The lawsuit alleges that the asserted patents are infringed by Meta’s core technologies that enable Meta’s Newsfeed and Timeline features.
Mirror Worlds Patent Portfolio Litigation Meta (Facebook) Litigation On May 9, 2017, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, initiated litigation against Facebook, Inc. (“now Meta Platforms, Inc., “Meta”) in the U.S. District Court for the Southern District of New York, for infringement of U.S. Patent No. 6,006,227, U.S. Patent No. 7,865,538 and U.S.
Discovery is complete and the parties have each submitted summary judgment motions which are pending. A trial date has not yet been set. Mirror Worlds Patent Portfolio Litigation Meta (Facebook) Litigation On May 9, 2017, Mirror Worlds Technologies, LLC, our wholly-owned subsidiary, initiated litigation against Facebook, Inc. (“now Meta Platforms, Inc., “Meta”) in the U.S.
Removed
The lawsuit alleges that Google and YouTube have infringed and continue to infringe certain of our patents by making, using, selling and offering to sell unlicensed systems and related products and services, which include YouTube’s Content ID system.
Added
On March 7, 2022, the District Court entered a ruling granting in part and denying in part a motion for summary judgment by Meta.
Removed
The case remains pending in the Supreme Court of the State of New York, County of New York. ITEM 4. MINE SAFETY DISCLOSURES None. PART II
Added
Our litigations against Ubiquity Inc and Honeywell International Inc. remain pending .
Added
On August 27, 2023, the Court granted Netgear’s cross-motion for summary judgment and dismissed our claims and also denied our summary judgment motion with respect to Netgear’s counterclaim for breach of the license agreement. We appealed the court’s decision.
Added
On February 20, 2024, the Appellate Division, First Department, upheld the lower court decision dismissing our complaint and granted our motion to dismiss Netgear’s counterclaim that we breached the most favored license provision concerning two licensees, but said there was a triable issue of fact with respect to one licensee.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plan Information The following table summarizes share and exercise price information for our equity compensation plans as of December 31, 2022.
Biggest changeUnder the 10b5-1 Plan, our third party broker may purchase up to 1,000,000 shares of our common stock, subject to certain price, market, volume and timing constraints, in accordance with the terms of the plan and subject to Rule 10b5-1 and Rule 10b-18 of the Exchange Act. -23- Equity Compensation Plan Information The following table summarizes share and exercise price information for our equity compensation plans as of December 31, 2023.
However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our earnings, financial requirements and other factors existing at the time. -21- As of December 31, 2022, we accrued dividends of $37,000 for unvested restricted stock units with dividend equivalent rights. Recent Issuances of Unregistered Securities .
However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our earnings, financial requirements and other factors existing at the time. As of December 31, 2023, we accrued dividends of $99,000 for unvested restricted stock units with dividend equivalent rights. Recent Issuances of Unregistered Securities .
Number of securities to be issued upon exercise of outstanding options and rights Weighted-average exercise price of outstanding options and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (a) (b) (c) Equity compensation plans approved by security holders 625,000 (1) $ — (2) 2,300,000 (3) Equity compensation plans not approved by security holders $ — $ — — Total 625,000 $ — 2,300,000 (1) Consists of shares issuable upon vesting of outstanding restricted stock units issued under the 2013 Stock Incentive Plan.
Number of securities to be issued upon exercise of outstanding options and rights Weighted-average exercise price of outstanding options and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) (a) (b) (c) Equity compensation plans approved by security holders 587,500 (1) $ — (2) 2,180,000 (3) Equity compensation plans not approved by security holders $ — $ — — Total 587,500 $ — 2,180,000 _______________ (1) Consists of shares issuable upon vesting of outstanding restricted stock units issued under the 2022 Stock Incentive Plan and the 2013 Stock Incentive Plan.
There were no unregistered sales of equity securities during the quarter ended December 31, 2022. Stock Repurchases. On June 11, 2021, our Board of Directors authorized an extension and increase of the share repurchase program (“Share Repurchase Program”) to repurchase up to $5,000,000 of shares of our common stock over the subsequent 24 month period.
There were no unregistered sales of equity securities during the quarter ended December 31, 2023. Stock Repurchases. On June 14, 2023, our Board of Directors authorized an extension and increase of the share repurchase program (“Share Repurchase Program”) to repurchase up to $5,000,000 of shares of our common stock over the subsequent 24 month period.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information . Our common stock is listed for trading on the NYSE American exchange under the symbol “NTIP”. On March 23, 2023, the closing price for our common stock as reported on the NYSE American Exchange was $2.10 per share.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information . Our common stock is listed for trading on the NYSE American exchange under the symbol “NTIP”. On March 1 , 2024, the closing price for our common stock as reported on the NYSE American exchange was $2.15 per share.
On March 3, 2023, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of March 31, 2023 to all common shareholders of record as of March 15, 2023. At this time we anticipate continuing to pay dividends consistent with our policy.
On February 23, 2024, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of March 29, 2024 to all common shareholders of record as of March 15 , 2024. At this time, we anticipate continuing to pay dividends consistent with our policy.
(2) Does not take into account outstanding restricted stock units as these awards have no exercise price. (3) Represents shares of common stock reserved for issuance under our 2022 Stock Incentive Plan.
(2) Does not take into account outstanding restricted stock units as these awards have no exercise price. (3) Represents shares of common stock reserved for issuance under our 2022 Stock Incentive Plan. We have discontinued issuing awards under our 2013 Stock Incentive Plan as a result of adoption of the 2022 Stock Incentive Plan.
We have discontinued issuing awards under our 2013 Stock Incentive Plan as a result of adoption of the 2022 Stock Incentive Plan. -23- Our 2022 Stock Incentive Plan (“2022 Plan”) provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock units (c) restricted stock, (d) stock appreciation rights, (e) unrestricted stock awards, (f) cash based awards, and (g) other stock-based awards.
Our 2022 Stock Incentive Plan (“2022 Plan”) provides for the grant of any or all of the following types of awards: (a) stock options, (b) restricted stock units (c) restricted stock, (d) stock appreciation rights, (e) unrestricted stock awards, (f) cash based awards, and (g) other stock-based awards.
On September 9, 2022, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of September 30, 2022 to all common shareholders of record as of September 20, 2022.
On September 8, 2023, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of September 29, 2023 to all common shareholders of record as of September 19, 2023.
Awards under the 2022 Plan may be granted to our employees, directors and consultants. As of December 31, 2022, there were no awards outstanding under our 2022 Plan and 625,000 shares issuable upon vesting restricted stock units under our 2013 Stock Incentive Plan (“2013 Plan”). ITEM 6. (RESERVED) Not applicable.
Awards under the 2022 Plan may be granted to our employees, directors and consultants. As of December 31, 2023, there were 75,000 shares issuable upon vesting of outstanding restricted stock units under our 2022 Plan and 512,500 shares issuable upon vesting outstanding restricted stock units under our 2013 Stock Incentive Plan (“2013 Plan”).
The number of record holders of our common stock was 39 as of March 23, 2023. In addition, we believe there were in excess of approximately 1200 holders of our common stock in “street name” as of March 23, 2023. Dividend Policy .
The number of record holders of our common stock was 37 as of March 1 , 2024. In addition, we believe there were in excess of approximately 1,000 holders of our common stock in “street name” as of March 1, 2024. Dividend Policy .
On February 23, 2022, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of March 24, 2022 to all common shareholders of record as of March 9, 2022.
On March 3, 2023, our Board of Directors declared a semi-annual cash dividend of $0.05 per share with a payment date of March 31, 2023 to all common shareholders of record as of March 15, 2023.
Since inception of our Share Repurchase Program (August 2011) to December 31, 2022, we repurchased an aggregate of 9,212,664 shares of our common stock at a cost of $17,758,000 (exclusive of commissions) or an average per share price of $1.93.
Since inception of our Share Repurchase Program (August 2011) to December 31, 2023, we repurchased an aggregate of 9,523,982 shares of our common stock at a cost of $18,712,916 (exclusive of commissions) or an average per share price of $1.94.
The Share Repurchase Program may be increased, suspended or discontinued at any time. -22- During the months of October, November and December 2022, we repurchased common stock pursuant to our Share Repurchase Program as indicated below: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares) that May Yet Be Purchased Under the Plans or Programs October 1, 2022 to October 31, 2022 — — — $3,508,374 November 1, 2022 to November 30, 2022 4,210 $2.23 4,210 3,498,965 December 1, 2022 to December 31, 2022 46,027 $2.20 46,027 3,397,891 Total 50,237 $2.20 50,237 During the year ended December 31, 2022, we repurchased an aggregate of 228,530 shares of our common stock pursuant to our Share Repurchase Program at a cost of $531,000 (exclusive of commissions) or an average price per share of $2.33.
The Share Repurchase Program may be increased, suspended or discontinued at any time. -22- During the months of October, November and December 2023, we repurchased common stock pursuant to our Share Repurchase Program as indicated below: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares) that May Yet Be Purchased Under the Plans or Programs October 1, 2023 to October 31, 2023 31,146 $2.22 31,146 $4,561,139 November 1, 2023 to November 30, 2023 77,087 $2.20 77,087 $4,391,365 December 1, 2023 to December 31, 2023 8,581 $2.17 8,581 $4,372,705 Total 116,814 $2.20 116,814 During the year ended December 31, 2023, we repurchased an aggregate of 428,132 shares of our common stock pursuant to our Share Repurchase Program at a cost of $955,182 (exclusive of commissions) or an average price per share of $ 2.23.
Added
On December 29, 2023, we entered into a written trading plan( the “10b5-1 Plan”) under Rule 10b5-1 of the Securities Exchange Act of 1934 (the” Exchange Act”).
Added
Adopting a trading plan that satisfies the conditions of Rule 10b5-1 allows a company to repurchase its shares at times when it might otherwise be prevented from doing so due to self-imposed trading black-outs or pursuant to insider trading laws.
Added
Purchases under the 10b5-1 Plan may be made during the following periods: (1) beginning on January 9, 2024 until two trading days after we issue a press release announcing our financial results for the year ended December 31, 2023, and (2) beginning on April 1, 2024 until two trading days after we issue a press release announcing our financial results for the quarter ended March 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

34 edited+17 added−25 removed2 unchanged
Biggest changeThe decrease in working capital was primarily due to our operating loss of $3,903,000, payment of income taxes of $3,004,000, cash dividends paid of $2,455,000, and an additional investment of $1,000,000 in ILiAD. -28- Net cash (used in) provided by operating activities for 2022 decreased by $24,935,000 from $19,499,000 provided by operating activities for 2021 to $5,436,000 used in operating activities for 2022, primarily due to no revenue in 2022 as compared to revenue of $36,029,000 for 2021.
Biggest changeThese uses of working capital were offset somewhat by interest and dividend income of $1,868,000 and realized and unrealized gains on investment of $525,000. -29- Net cash provided by (used in) operating activities for 2023 increased by $5,767,000 from $(5,436,000) for 2022 to $331,000 for 2023, primarily as a result of lower income taxes paid in 2023 of $2,722,000 and increased interest and dividend income of $1,868,000.
We maintain our cash in money market funds, government securities, certificates of deposit, and short-term fixed income securities. Accordingly, we do not believe that our investments have significant exposure to interest rate risk. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements.
We maintain our cash equivalents and marketable securities in money market funds, government securities, certificates of deposit and short-term fixed income securities. Accordingly, we do not believe that our investments have significant exposure to interest rate risk. OFF-BALANCE SHEET ARRANGEMENTS We do not have any off-balance sheet arrangements.
We presently own ninety-seven (97) U.S. patents and [ eight ] foreign patents relating to: (i) our Cox Patent Portfolio relating to enabling technology for identifying media content on the Internet and taking further action to be performed after such identification; (ii) our M2M/IoT Patent Portfolio relating to, among other things, enabling technology for authenticating, provisioning and using embedded Sim (Subscriber Identification Module) technology in next generation IoT, Machine-to-Machine, and other mobile devices, including smartphones, tablets and computers; (iii) our HFT Patent Portfolio covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our Remote Power Patent covering the delivery of power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.
We presently own one hundred (100) U.S. patents and fifteen (15) foreign patents relating to: (i) our Cox Patent Portfolio relating to enabling technology for identifying media content on the Internet and taking further action to be performed after such identification; (ii) our M2M/IoT Patent Portfolio relating to, among other things, enabling technology for authenticating and using eSIM (embedded Subscriber Identification Module) technology in IoT, Machine-to-Machine and other mobile devices, including smartphones, tablets and computers, as well as automobiles; (iii) our HFT Patent Portfolio covering certain advanced technologies relating to high frequency trading, which inventions specifically address technological problems associated with speed and latency and provide critical latency gains in trading systems where the difference between success and failure may be measured in nanoseconds; (iv) our Mirror Worlds Patent Portfolio relating to foundational technologies that enable unified search and indexing, displaying and archiving of documents in a computer system; and (v) our Remote Power Patent covering the delivery of power over Ethernet (PoE) cables for the purpose of remotely powering network devices, such as wireless access ports, IP phones and network based cameras.
However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our financial requirements, earnings and other factors existing at the time (see Note O to our consolidated financial statements included herein). -26- RESULTS OF OPERATIONS Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Revenue .
However, our dividend policy undergoes a periodic review by our Board of Directors and is subject to change at any time depending upon our financial requirements, earnings and other factors existing at the time (see Note N to our consolidated financial statements included herein). -27- RESULTS OF OPERATIONS Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Revenue .
In addition, we continue to seek to acquire additional intellectual property assets to develop, commercialize, license or otherwise monetize. Our strategy includes working with inventors and patent owners to assist in the development and monetization of their patented technologies. We may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.
Our strategy includes working with inventors and patent owners to assist in the development and monetization of their patented technologies. We may also enter into strategic relationships with third parties to develop, commercialize, license or otherwise monetize their intellectual property.
At December 31, 2022, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $48,439,000 and working capital of $47,359,000. Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the next twelve months and the foreseeable future.
At December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000 . Based on our current cash position, we believe that we will have sufficient cash to fund our operations for the next twelve months and the foreseeable future.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the “Risk Factors” Section on pages 10-18 hereof. OVERVIEW Our principal business is the development, licensing and protection of our intellectual property assets.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the “Risk Factors” Section on pages 10 - 18 hereof.
In addition, we have pending litigation involving certain patents within our Cox Patent Portfolio and have appealed the judgment of the District Court dismissing our litigation against Meta (Facebook) on the grounds of non-infringement involving certain patents within our Mirror Worlds Portfolio.
In addition, we have pending litigation involving certain patents within our Cox Patent Portfolio and have appealed the judgment of the District Court dismissing our litigation against Meta (Facebook) on the grounds of non-infringement involving certain patents within our Mirror Worlds Portfolio. We may not achieve successful outcomes of such litigation, the appeal, or future litigation involving our patent assets.
Included in the costs of revenue for 2021 were contingent legal fees of $10,346,000 and incentive bonus compensation of $1,801,000 payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J[1] to our consolidated financial statements included herein).
We had costs of revenue of $874,000 and $-0- for 2023 and 2022, respectively. Included in the costs of revenue for 2023 were contingent legal fees of $744,000 and incentive bonus compensation of $130,000 payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J[1] to our consolidated financial statements included herein).
Our annual and quarterly operating and financial results may fluctuate significantly from period to period as a result of a variety of factors that are outside our control, including the timing and our ability to achieve successful outcomes of our patent litigation, our ability and timing of consummating future license agreements for our intellectual property, and whether we will achieve a return on our investment in ILiAD and the timing of any such return.
Our annual and quarterly operating and financial results may fluctuate significantly from period to period as a result of a variety of factors that are outside our control, including the timing and our ability to achieve successful outcomes of our patent litigation, our ability and timing of consummating future license agreements for our intellectual property, and whether we will achieve a return on our investment in ILiAD and the timing of any such return. -26- Our future operating results may also be materially impacted by our ability to acquire high quality patents which management believes have the potential to generate significant licensing opportunities.
During the fourth quarter of 2022, we commenced separate litigation against ten defendants involving our Remote Power Patent for patent infringement for the period prior to March 7, 2020 (see “Legal Proceedings” on page 20 hereof).
During the fourth quarter of 2022, we commenced nine separate litigations against ten defendants involving our Remote Power Patent for patent infringement for the period prior to March 7, 2020.
We have been dependent upon our Remote Power Patent for a significant portion of our revenue. Our Remote Power Patent generated licensing revenue in excess of $187,000,000 from May 2007 through December 31, 2022. We no longer receive licensing revenue for our Remote Power Patent for any period subsequent March 7, 2020 (the expiration date of the patent).
Our Remote Power Patent has generated revenue in excess of $188,000,000 from May 2007 through December 31, 2023. We no longer receive licensing revenue for our Remote Power Patent for any period subsequent to March 7, 2020 (the expiration date of the patent).
Other significant components of expenses impacting our net income when revenue is recorded relate to contingent legal fees and expenses related to our patent litigation (see Note I[1] to our consolidated financial statements included herein) and incentive compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J to our consolidated financial statements included herein), both such components of expenses are based on a percentage of the licensing revenue received by us as a result of litigation or otherwise.
The significant components of expenses, when revenue is recorded, that may impact our net income (loss) relate to contingent legal fees and expenses related to our patent litigation (see Note I[1] to our consolidated financial statements included herein) and incentive compensation payable to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J[1] to our consolidated financial statements included herein).
As a result of the foregoing, we incurred a net loss of $2,326,000 or $0.10 per share basic and diluted for 2022 compared with net income of $14,281,000 or $0.59 per share basic and $0.58 per share diluted for 2021.
As a result of the foregoing, we realized a net loss of $1,457,000 or $0.06 per share basic and diluted for 2023 compared with a net loss of $2,326,000 or $0.10 per share basic and diluted for 2022.
For 2022, we recorded a gain on our equity method investment in ILiAD of $3,883,000 as compared to $-0- for 2021, as a result of an unrealized gain in connection with ILiAD’s August 2022 private offering, which was accounted for as an observable price transaction (see Note B[6] and Note H to our consolidated financial statements included herein). -27- Realized and Unrealized Loss on Marketable Securities.
For 2022, we recorded a gain on our equity method investment in ILiAD of $3,883,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in August 2022( see Note H to our consolidated financial statements included herein). Gain on Conversion of Note .
Net cash used in financing activities for 2022 and 2021 was $3,342,000 and $3,501,000, respectively. The reduction of $159,000 primarily resulted from repurchases of our common stock of $534,000 for 2022 compared to $1,077,000 of repurchases for 2021 and offset by an increase of $341,000 in the value of shares delivered to fund withholding taxes for 2022.
Net cash used in financing activities for 2023 and 2022 was $3,420,000 and $3,342,000, respectively. The increase of $78,000 primarily resulted from an increase in repurchases of treasury shares of $432,000 in 2023, offset by a reduction in the value of shares delivered to fund withholding taxes of $272,000.
For 2022, we had $-0- current income tax for federal, state and local income taxes and a deferred tax expense of $607,000. For 2021, we had a current tax expense for federal, state and local income taxes of $2,952,000 and a deferred tax expense of $1,508,000.
For 2023, we had a current tax expense for federal, state and local income taxes of $11,000 and a deferred tax benefit of $399,000 . For 2022, we had no current income tax for federal, state and local income taxes and a deferred tax expense of $607,000.
The increase of $640,000 in the net losses of ILiAD includes an additional loss of $398,000 as a result of new information received from ILiAD in the fourth quarter of 2022 (see Note B[6] and Note H to our consolidated financial statements included herein). Net (Loss) Income .
The increase in our equity share of the ILiAD net losses of $364,000 for 2023 includes an additional loss of $42,000 recorded on a one quarter lag basis as a result of audited financial information for 2022 received in 2023 from ILiAD (see Note B[2] to our consolidated financial statements included herein). Net Loss .
In addition, we continually review opportunities to acquire or license additional intellectual property as well as other strategic alternatives. -24- At December 31, 2022, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $48,439,000 and working capital of $47,359,000.
At December 31, 2023, our principal sources of liquidity consisted of cash and cash equivalents and marketable securities of $45,467,000 and working capital of $44,850,000 . Based on our cash position, we review opportunities to acquire additional intellectual property as well as evaluate other strategic opportunities.
On June 9, 2021, our Board of Directors approved the continuation of our dividend policy consisting of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year. In 2022 and 2021, we paid semi-annual cash dividends in accordance with our dividend policy.
Our current dividend policy consists of semi-annual cash dividends of $0.05 per share ($0.10 per share annually) which have been paid in March and September of each year. In 2023 and 2022, we paid semi-annual cash dividends in accordance with our dividend policy. At this time, we anticipate continuing to pay dividends consistent with our policy.
Our patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as we have achieved with respect to our Remote Power Patent and Mirror Worlds Patent Portfolio. -25- On March 25, 2022, we completed the acquisition of a new patent portfolio (the HFT Patent Portfolio) currently consisting of nine U.S. patents and two pending U.S. patents (see Note I[2] to our consolidated financial statements included in this Annual Report).
Our patent acquisition and development strategy is to focus on acquiring high quality patents which management believes have the potential to generate significant licensing opportunities as we have achieved with respect to our Remote Power Patent and Mirror Worlds Patent Portfolio.
For 2022, we recorded realized and unrealized losses on marketable securities of $1,351,000 as compared to $173,000 for 2021. The increased loss of $1,178,000 was due to unfavorable market conditions in the fixed income mutual funds market in 2022 compared to 2021. Income Taxes .
For 2023, we recorded realized and unrealized gains on marketable securities of $525,000 as compared to realized and unrealized losses on marketable securities of $1,351,000 in 2022, primarily due to the more favorable interest rate environment for fixed income securities in 2023 as compared to 2022. Income Taxes .
For 2022, we recorded a gain on conversion of our ILiAD convertible note of $271,000 as compared to $-0- for 2021 as a result of the conversion of the ILiAD convertible note and accrued interest into equity of ILiAD (see Note H to our consolidated financial statements included herein). Gain on Equity Method Investment .
For 2022, we recorded a gain on conversion of our ILiAD convertible note of $271,000, as compared to none for 2023, as a result of an observable price transaction relating to ILiAD’s private offering in August 2022( see Note H to our consolidated financial statements included herein). -28- Realized and Unrealized Loss on Marketable Securities.
The net decrease of income tax expense of $3,853,000 was primarily due to no revenue in 2022. Share of Net Losses of Equity Method Investee . We incurred net losses of $1,639,000 and $999,000 during 2022 and 2021, respectively, related to our equity method investment in ILiAD.
The net decrease in income tax expenses of $995,000 was primarily due to gains on our equity method investment and conversion of our ILiAD note in 2022 compared to no such transactions in 2023. Share of Net Losses of Equity Method Investee .
CONTRACTUAL OBLIGATIONS We do not have any long-term debt, capital lease obligations, purchase obligations or other long-term liabilities except for our lease obligations for our principal office space (see Note I[4] to our consolidated financial statement included herein).
CONTRACTUAL OBLIGATIONS We do not have any long-term debt, capital lease obligations, purchase obligations or other long-term liabilities.
Interest and dividend income for 2022 was $1,020,000 as compared to $327,000 for 2021 primarily as a result of a change in the mix of our short term fixed income investments and cash equivalents to higher yielding investments as interest rates were rising in 2022. Gain on Conversion of Note .
Interest and Dividend Income. Interest and dividend income for 2023 was $1,868,000 as compared to interest and dividend income of $1,020,000 for 2022. The increase in interest and dividend income of $848,000 for 2023 was primarily due to higher yielding fixed income investments due to generally higher interest rates during 2023. Gain on Equity Method Investment .
In addition, in 2022 we paid $3,004,000 in income taxes related to 2021 taxable income. Net cash (used in) provided by investing activities during 2022 was $(22,271,000) as compared to $2,994,000 for 2021, primarily as a result of the differential of increased purchases and decreased sales of marketable securities.
Net cash provided by (used in) investing activities during 2023 increased by $28,808,000 to $6,537,000 as compared to $(22,271,000) for 2022, primarily as a result of a significant shift to investments in marketable securities in 2022 from investments in securities previously classified as cash and cash equivalents.
Our future operating results may also be materially impacted by our ability to acquire high quality patents which management believes have the potential to generate significant licensing opportunities. In the future, we may not be able to identify or consummate such patent acquisitions or, if consummated, achieve significant licensing revenue with respect to such acquisitions.
In the future, we may not be able to identify or consummate such patent acquisitions or, if consummated, achieve significant licensing revenue with respect to such acquisitions. In 2024, and future years we could be classified as a Personal Holding Company.
We had no revenue for the year ended December 31, 2022 (“2022”) as compared to revenue of $36,029,000 for the year ended December 31, 2021 (“2021”). Revenue for 2021 resulted from our resolution of a contractual dispute with Cisco concerning licensing of our Remote Power Patent and our litigation settlement with Hewlett-Packard. Operating Expenses .
We had revenue of $2,601,000 for the year ended December 31, 2023 (“2023”) as compared to no revenue for the year ended December 31, 2022 (“2022”). Our revenue for 2023 was from litigation settlements involving our Remote Power Patent (see Note K[4] to our consolidated financial statements included herein). Operating Expenses .
We also intend to commence efforts to monetize certain patents within our M2M/IoT Patent Portfolio and HFT Patent Portfolio. We may not achieve successful outcomes of such litigation, the appeal, or future litigation involving our patent assets. Our current strategy includes continuing our licensing efforts with respect to our intellectual property assets and the monetization of our patent portfolios.
Our current strategy includes continuing our licensing efforts with respect to our intellectual property assets and the monetization of our patent portfolios. In addition, we continue to seek to acquire additional intellectual property assets to develop, commercialize, license or otherwise monetize.
The preparation of our financial statements included in this Annual Report on Form 10-K 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 financial statements, and the reported amounts of revenues and expenses during the reporting periods.
CRITICAL ACCOUNTING ESTIMATES We prepare our consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.
Operating expenses for 2022 were $3,903,000 as compared to $16,443,000 for 2021. We had costs of revenue of $-0- and $12,147,000 for 2022 and 2021, respectively.
Operating expenses for 2023 were $4,836,000 as compared to $3,903,000 for 2022.
Material increases in our liquidity and capital resources are primarily dependent upon litigation outcomes and licensing of our intellectual property as well as whether we will be able to achieve returns on our investment in ILiAD. Working capital decreased by $8,306,000 at December 31, 2022 to $47,359,000 as compared to working capital of $55,665,000 at December 31, 2021.
Our patent infringement litigation or realization of our investment in ILiAD may result in a material increase in our liquidity and capital resources. Working capital decreased by $2,509,000 at December 31,2023 to $44,850,000 as compared to working capital of $47,359,000 at December 31, 2022.
Our net loss for 2022 was due to having no revenue and our continuing operating expenses supporting our patent portfolios, offset by our gain on equity method investment of $3,883,000 and interest and dividend income of $1,020,000.
Our net loss for 2023 decreased by $869,000 compared to 2022 primarily due to increases in revenue of $2,601,000, interest and dividend income of $848,000, and realized and unrealized gains on investments of $1,876,000, as compared to gains in 2022 of $3,727,000 on our equity investment in ILiAD and $271,000 on conversion of our ILiAD note.
Removed
Based on our cash position, we continually review opportunities to acquire additional intellectual property as well as evaluate other strategic opportunities. To date we have invested $7,000,000 in ILiAD, a clinical stage biotechnology company with an exclusive license to sixty-four patents.
Added
OVERVIEW Our principal business is the development, licensing and protection of our intellectual property assets.
Removed
Although in 2022 we recorded gains on our investment in ILiAD as referenced below, our investment continues to involve significant risk and the outcome is uncertain. We had no revenue for the year ended December 31, 2022.
Added
With respect to our one hundred (100) U.S. patents, fifty-four (54) of such patents have expired. However, we can assert expired patents against third parties but only for past damages up to the patent expiration date.
Removed
During the year ended December 31, 2022, we recorded a gain on our equity investment in ILiAD of $3,883,000 in accordance with ASC 323 due to an observable transaction price and dilution to our ownership of ILiAD as a result of an ILiAD private offering as well as a gain on conversion of our convertible note from ILiAD of $271,000 in the private offering (see Note B[6] and Note H to our consolidated financial statements included herein).
Added
We currently have pending litigation involving expired patents including our Remote Power Patent and certain patents within our Cox and Mirror Worlds Patent Portfolios (see Note K to our consolidated financial statements included herein). Our revenue is dependent upon our ability to achieve successful litigation outcomes.
Removed
The significant components of expenses impacting our net income include income tax expense as a result of transactions with our equity method investment in ILiAD.
Added
To date we have invested $7,000,000 in ILiAD, a clinical stage biotechnology company with an exclusive license to seventy(70) patents (see Note H to our consolidated financial statements included herein). Our investment continues to involve significant risk and the outcome is uncertain. -25- We have been dependent upon our Remote Power Patent for a significant portion of our revenue.
Removed
In 2023 and future years we could be classified as a Personal Holding Company.
Added
During 2023, we entered into settlement agreements with eight of the defendants with respect to the aforementioned litigation resulting in aggregate settlement payments made to us of $2,601,000 and a future conditional payment of $150,000 (see Note K to our consolidated financial statements included herein). All of our revenue for 2023 was from these settlements involving our Remote Power Patent.
Removed
At this time we anticipate continuing to pay dividends consistent with our policy.
Added
If we are unable to successfully monetize our other patent portfolios or achieve a successful outcome of our investment in ILiAD, our business, financial condition and results of operations will be negatively impacted.
Removed
Professional fees and related costs were $809,000 for 2022 as compared to $1,500,000 for 2021 as a result of decreased expenses related to patent litigation. Stock-based compensation was $585,000 for 2022 as compared to $238,000 for 2021.
Added
Both such components of expenses are based on a percentage of the revenue received by us as a result of litigation or otherwise.
Removed
The increase in stock-based compensation expense was due to the issuance of restricted stock units to our Chairman and Chief Executive Officer pursuant to his employment agreement (see Note J[1] to our consolidated financial statements included herein). Operating (Loss) Income . We had an operating loss of $3,903,000 for 2022 compared with operating income of $19,586,000 for 2021.
Added
The increase in operating expenses of $933,000 was primarily due to increases in costs of revenue of $874,000 related to contingent legal fees and incentive bonus compensation in connection with the litigation settlements and increases in general and administrative expenses of $111,000, offset somewhat by a reduction in amortization of patents of $50,000.
Removed
The operating loss for 2022 was due to no revenue for the period as compared to revenue of $36,029,000 for 2021. Interest and Dividend Income .
Added
General and administrative expenses were $2,889,000 for 2023 as compared to $2,778,000 for 2022. The increase in general and administrative expenses for 2023 was primarily due to an increase in state franchise taxes of $175,000 as well as increases in payroll taxes of $98,000 and NYSE American listing fees of $31,000.
Removed
In comparison, we had revenue of $36,029,000 for 2021 from the resolution of our contractual dispute with Cisco and our litigation settlement with Hewlett-Packard. LIQUIDITY AND CAPITAL RESOURCES We have financed our operations primarily from revenue from licensing our patents.
Added
These increases were offset somewhat by reductions in office rent of $71,000 and employee benefits costs of $60,000. Operating Loss. We had an operating loss of $2,235,000 for 2023 compared with an operating loss of $3,903,000 for 2022. The operating loss decrease of $1,668,000 was due to revenue of $2,601,000 from litigation settlements offset by increased operating expenses of $933,000.
Removed
CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our discussion and analysis of our financial condition, results of operations and cash flows are based on our audited consolidated financial statements which have been prepared in accordance with GAAP.
Added
We recognized $2,003,000 of net losses during 2023 related to our equity share of ILiAD net losses, as compared to recognized net losses of $1,639,000 for 2022 (see Note H to our consolidated financial statements included herein).
Removed
The significant estimates and assumptions made in the preparation of our consolidated financial statements include revenue recognition, contingent legal fees and related expenses, income taxes, valuation of patents and equity method investments. Actual results could be materially different from those estimates, upon which the carrying values were based.
Added
These increases in 2023 of revenue and income items were offset by an increase in operating expenses of $933,000 and a reduction of income taxes of $995,000 . LIQUIDITY AND CAPITAL RESOURCES We have financed our operations primarily from revenue from licensing our patents.
Removed
See also Note B to our consolidated financial statements included in this Annual Report for full disclosure of our accounting policies. -29- We believe our most critical accounting policies and estimates to be the following: Equity Method Investments Equity method investments are equity securities in entities that we do not control but over which we have the ability to exercise significant influence.
Added
The decrease in working capital in 2023 was primarily due to our operating loss of $2,235,000, cash dividends payments of $2,371,000 and share repurchases of $966,000.
Removed
These investments are accounted for under the equity method of accounting in accordance with ASC 323, Investments — Equity Method and Joint Ventures (see Note B[6] hereof). Equity method investments are measured at cost minus impairment, if any, plus or minus our share of an investee’s income or loss, and adjustments based on the investees observable price transactions, if any.
Added
Also, non-cash gains on equity method investment of $3,883,000 and on conversion of the ILiAD note of $271,000 represented uses of cash in 2022 compared to no such transactions in 2023.
Removed
Our proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag. When our carrying value in an equity method investment is reduced to zero, no further losses are recorded in our financial statements unless we guaranteed obligations of the investee company or have committed additional funding.
Added
To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.
Removed
When the investee company subsequently reports income, we will not record our share of such income until it equals the amount of our share of losses not previously recognized.
Added
We evaluate these estimates on an ongoing basis. -30- We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Removed
In the event the equity method investee enters into an observable price transaction, the Company will increase or decrease the carrying value in its equity method investment based on the transaction price. Upon sale of equity method investments, the difference between sales proceeds and the carrying amount of the equity investment is recognized in profit or loss.
Added
There are items within our financial statements that require estimation but are not deemed critical, as defined above. For a detailed discussion of our significant accounting policies and related judgments, see Note B to our consolidated financial statements included herein. -31-
Removed
In determining whether an equity method investment is impaired, we take into consideration a variety of factors including the operating and financial performance of the investee, the investee’s future business plans and projections, discussions with the investee’s management, and our intent and ability to hold the investment until it recovers in value.
Removed
Accordingly, we make assumptions and estimates in assessing whether an impairment has occurred and if, in the future, our assumptions and estimates made in assessing the fair value of these investments change, this could result in a material decrease in the carrying value of the investment.
Removed
This would cause us to write-down the carrying value of the investment and could have a material adverse effect on our results of operations in the period the impairment charge is taken.
Removed
Income Taxes We account for income taxes in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 740, Income Taxes (ASC 740), which requires us to use the assets and liability method of accounting for income taxes.
Removed
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.
Removed
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.
Removed
In evaluating the need for a valuation allowance, we estimate future taxable income based on management business plans. This process involves significant management judgment about assumptions that are subject to change from period to period.
Removed
Because the recognition of deferred tax assets requires management to make significant judgments about future earnings, the periods in which items will impact taxable income and the application of inherently complex tax laws, we have identified the assessment of deferred tax assets and the need for any related valuation allowance as a critical accounting estimate. -30-

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