NETWORK-1 SECURITY SOLUTIONS, INC.
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-126013
PROSPECTUS SUPPLEMENT NO. 12
(To Prospectus dated December 22, 2005)
This is a prospectus supplement to our prospectus dated December 22, 2005 (the
"Prospectus") relating to the resale from time to time by selling stockholders
of up to 15,786,256 shares of our Common Stock, including shares issuable upon
exercise of outstanding warrants and options. On August 7, 2006, we filed with
the Securities and Exchange Commission a Current Report on Form 8-K. The text of
the Current Report on Form 8-K is attached to and a part of this supplement.
This prospectus supplement should be read in conjunction with the Prospectus and
the prior prospectus supplements, and may not be delivered or utilized without
the Prospectus and the prior prospectus supplements. This prospectus supplement
is qualified by reference to the Prospectus, except to the extent that the
information provided by this prospectus supplement supersedes the information
contained in the Prospectus.
The securities offered by the Prospectus involve a high degree of risk. You
should carefully consider the "Risk Factors" referenced on page 7 of the
Prospectus in determining whether to purchase the Common Stock.
The date of this prospectus supplement is August 8, 2006.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 3, 2006
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Network-1 Security Solutions, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-14896 11-3027591
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
445 Park Avenue, Suite 1028, New York, New York 10022
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(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 829-5700
N/A
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
[_] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 3, 2006, the Company issued a press release announcing its
results of operations for the quarter ended June 30, 2006. A copy of the press
release is furnished herewith as Exhibit 99.1.
The information contained in this Item 2.02, including Exhibit 99.1
attached hereto, is being furnished and shall not be deemed to be "filed" for
the purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or otherwise subject to the liabilities of that Section. Furthermore, the
information contained in this Item 2.02 or Exhibit 99.1 shall not be deemed to
be incorporated by reference into any registration statement or other document
filed pursuant to the Securities Act of 1933, as amended, except as shall be
expressly set forth by specific reference in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Exhibit Number Description
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99.1 Press Release, dated August 3, 2006
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORK-1 SECURITY SOLUTIONS, INC.
Dated: August 7, 2006 By: /S/ Corey M. Horowitz
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Name: Corey M. Horowitz
Title: Chairman & Chief Executive
Officer
EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
Corey M. Horowitz, Chairman and CEO
Network-1 Security Solutions, In
(212) 829-5770
NETWORK-1 REPORTS SECOND QUARTER 2006 FINANCIAL RESULTS
NEW YORK, NEW YORK AUGUST 3, 2006-- Network-1 Security Solutions, Inc. (OTC
BB: NSSI) today announced financial results for the quarter ended June 30, 2006.
Network-1 reported a net loss of ($300,000) or $(0.02) per share for the
second quarter ended June 30, 2006 as compared to a net loss of ($229,000) or
$(0.01) per share for the second quarter ended June 30, 2005. Network-1 had no
revenues during the quarter ended June 30, 2006.
Network-1 reported a net loss from operations for the first six months of
2006 of $(616,000), or $(0.03) per share, compared with a net loss of
$(960,000), or $(0.05) per share, for the first six months of 2005. Included in
the net loss for the first six months ended June 30, 2005 is an expense of
$500,000 incurred in connection with the Company's payment of additional
purchase price in consideration for the restructuring of future contingent
payments under its Amended Patent Purchase Agreement with Merlot Communications,
Inc.
Net loss attributable to common stockholders for the six months ended June
30, 2006 was $(616,000) or $(0.03) per share as compared to a net loss
attributable to common stockholders of ($966,000) or ($0.05) per share for the
six months ended June 30, 2005.
At June 30, 2006, the Company had approximately $1,756,000 in cash and cash
equivalents which management believes will be sufficient to fund its operations
until December 2007, although there is no assurance that Network-1 will not have
sufficient capital prior to such date.
Network-1's patent infringement litigation against D-Link Systems Inc. and
its corporate parent D-Link Corporation, Inc. of Taiwan involving the Company's
Remote Power Patent is proceeding on a timely basis in the United States
District Court for the Eastern District of Texas, Tyler Division. During the
second quarter, United States Court of Appeals for the Federal Circuit issued an
order refusing D-Link Corporation and D-Link Systems, Inc.'s request to transfer
the litigation to the United States District Court for the Southern District of
New York.
As a result of the ruling, the litigation will proceed in Texas. A Markman
hearing will be held on September 19, 2006 and a trial is set for March 9, 2007.
"We are pleased with the progress of our litigation in Texas", commented
Corey M. Horowitz, Chairman and CEO of Network-1. "It is important to recognize
that the Markman hearing will be a significant event as we proceed to trial in
March, 2007. While the outcome of the litigation is still uncertain, we have
taken all the necessary steps to ensure that our case will proceed in a timely
manner and that we have the capital required to protect our intellectual
property."
The Remote Power Patent relates to, among other things, the delivery of
power over Ethernet cables in order to remotely power network connected devices
including, among others, wireless switches, wireless access points, RFID card
readers, VOIP telephones and network cameras. In June 2003, the Institute of
Electrical and Electronic Engineers (IEEE) approved the IEEE 802.3af Power over
Ethernet ("PoE") standard (the "Standard") which has led to the rapid adoption
of PoE. According to industry analysts, annual revenues for several of the
markets adopting this technology each exceed or are projected to exceed $1
billion.
About Network-1 Security Solutions, Inc.
Network-1 Security Solutions, Inc. is engaged in the acquisition, development,
licensing and protection of its intellectual property and proprietary
technologies. The Company owns six patents covering various telecommunications
and data networking technologies. As part of its business strategy it is
offering licenses to third parties who Network-1 believes could benefit from the
technologies covered by its patents.
THIS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
THESE STATEMENTS ADDRESS FUTURE EVENTS AND CONDITIONS CONCERNING THE COMPANY'S
BUSINESS PLANS. SUCH STATEMENTS ARE SUBJECT TO A NUMBER OF RISK FACTORS AND
UNCERTAINTIES AS DISCLOSED IN THE COMPANY'S QUARTERLY REPORT ON FORM 10-QSB FOR
THE QUARTERLY PERIOD ENDED JUNE 30, 2006 INCLUDING, AMONG OTHERS, THE ABILITY OF
NETWORK-1 TO OBTAIN LICENSE AGREEMENTS FROM THIRD PARTIES FOR ITS PATENT
PORTFOLIO, UNCERTAINTY OF PATENT LITIGATION, THE COMPANY'S ABILITY TO ACHIEVE
REVENUES AND PROFITS FROM ITS PATENT PORTFOLIO, THE COMPANY'S ABILITY TO RAISE
CAPITAL WHEN NEEDED, FUTURE ECONOMIC CONDITIONS AND TECHNOLOGY CHANGES AND
LEGISLATIVE, REGULATORY AND COMPETITIVE DEVELOPMENTS. EXCEPT AS OTHERWISE
REQUIRED TO BE DISCLOSED IN PERIODIC REPORTS, THE COMPANY EXPRESSLY DISCLAIMS
ANY FUTURE OBLIGATION OR UNDERTAKING TO UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENT CONTAINED HEREIN.
INVESTOR CONTACT:
Alliance Advisors, LLC
Alan Sheinwald, 914-244-0062
asheinwald@allianceadvisors.net
The condensed statements of operations and condensed balance sheet are attached.
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NETWORK-1 SECURITY SOLUTIONS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
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2006 2005 2006 2005
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Operating expenses:
General and administrative $ 318,000 $ 242,000 $ 646,000 $ 480,000
Patent Costs 500,000
LOSS BEFORE INTEREST INCOME (318,000) (242,000) (646,000) (980,000)
Interest income - net 18,000 13,000 30,000 20,000
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Net Loss $ (300,000) $ (229,000) $ (616,000) $ (960,000)
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Deemed dividend on additional warrant antidilution (6,000)
Adjustment
Net loss attributable to common stockholders $ (300,000) $ (229,000) $ (616,000) $ (966,000)
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(LOSS) PER COMMON SHARE: BASIC AND DILUTED $ (0.02) $ (0.01) $ (0.03) $ (0.05)
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WEIGHTED AVERAGE SHARES: BASIC AND DILUTED 19,049,724 17,697,572 18,444,617 17,657,793
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CONDENSED BALANCE SHEET AS OF 06/30/06
Cash and cash equivalents $1,756,000
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Total current assets $1,795,000
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Total assets $1,883,000
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Total current liabilities $ 151,000
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Total long term liabilities $ -0-
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Total stockholders' equity $1,732,000
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