NETWORK-1 TECHNOLOGIES, INC. Revenue Disclosure

 

[5]

Revenue Recognition

 

Under ASC 606, revenue is recognized when the Company completes the licensing of its intellectual property to its licensees, enters into a litigation settlement agreement involving any of its expired patents or obtains a judgment following trial after all appeals have been exhausted. With respect to licensing its intellectual property or such litigation settlement agreement, revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for licensing its intellectual property or in settlement of the litigation.

 

The Company determines revenue recognition through the following steps:

 

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identification of the license agreement or litigation settlement agreement;

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identification of the performance obligations in the license agreement or litigation settlement agreement;

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determination of the consideration for the license or settlement;

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allocation of the transaction price to the performance obligations in the contract; and

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recognition of revenue when the Company satisfies its performance obligations.

Revenue disaggregated by source is as follows:

Schedule of disaggregation of revenue
			Years Ended December 31,
			2024				2023
Litigation Settlements		$	100,000			$	2,601,000
Total Revenue		$	100,000			$	2,601,000

See Note K [4] hereof for further discussion of revenue recognized.

 

Revenue from the Company’s patent licensing and enforcement business is typically generated from negotiated license agreements or settlement agreements as a result of litigation involving the Company’s patents. The timing and amount of revenue recognized from each licensee or such settlement agreement depends upon a variety of factors, including the terms of each agreement and the nature of the obligations of the parties. These agreements may include, but are not limited to, elements related to past infringement liabilities, non-refundable upfront license fees, and ongoing royalties on licensed products sold by the licensee. Generally, in the event of settlement of litigation related to the Company’s assertion of patent infringement involving its intellectual property, defendants will either pay (i) a non-refundable lump sum payment for a non-exclusive fully-paid license, (ii) a non-refundable lump sum payment (license initiation fee) together with an ongoing obligation to pay quarterly or monthly royalties to the Company for the life of the licensed patent, or (iii) a lump sum settlement payment with respect to litigation involving the Company’s patents.

 

Fully-paid licenses provide for a non-refundable up-front payment for which the Company has no future obligations or performance requirements, revenue is generally recognized when the Company has obtained the signed license agreement, all performance obligations have been substantially performed, amounts are fixed and determinable, and collectability is reasonably assured. Revenue from fully-paid licenses may consist of one or more installments. The timing and amount of revenue recognized from each licensee depends upon a number of factors including the specific terms of each agreement and the nature of the deliverables and obligations.