WWW.EXFILE.COM, INC. -- 14909 -- NETWORK-1 SECURITY SOLUTIONS, INC. -- FORM S-8
REGISTRATION
NO. 333-_______
SECURITIES
AND EXCHANGE
COMMISSION
WASHINGTON,
D.C. 20549
FORM
S-8
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
(Exact
name of registrant as specified in its charter)
DELAWARE
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11-3027591
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(State
or other jurisdiction
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(I.R.S.
employer
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of
incorporation)
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identification
number)
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445
PARK AVENUE, SUITE 1028
NEW
YORK, NEW YORK 10022
(212)
829-5770
(Address,
including zip code, and telephone number, including area code,
of
Registrant’s
principal executive offices)
NETWORK-1
SECURITY SOLUTIONS, INC.
AMENDED
AND RESTATED 1996 STOCK OPTION PLAN
10
INDIVIDUAL OPTION AGREEMENTS
(Full
title of the plan)
COREY
M. HOROWITZ
CHAIRMAN
AND CHIEF EXECUTIVE OFFICER
NETWORK-1
SECURITY SOLUTIONS, INC.
445
PARK AVENUE, SUITE 1028
NEW
YORK, NEW YORK 10022
(212)
829-5770
(Address,
including zip code, and telephone number,
including
area code, of agent for service)
SAM
SCHWARTZ, ESQ.
EISEMAN
LEVINE LEHRHAUPT & KAKOYIANNIS, PC
805
THIRD AVENUE, 10TH
FLOOR, NEW YORK, NEW YORK 10022
(212)
752-1000
CALCULATION
OF REGISTRATION FEE
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TITLE
OF EACH CLASS OF SECURITIES
TO
BE REGISTERED
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AMOUNT
TO BE REGISTERED (1) (2)
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PROPOSED
MAXIMUM
OFFERING
PRICE
PER
SHARE (3)
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PROPOSED
MAXIMUM AGGREGATE OFFERING
PRICE
(3)
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AMOUNT
REGISTRATION
FEE
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Common
Stock, par value $.01 per share....
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4,132,731
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$1.40
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$5,785,823
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$619.08
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(1)
Represents 1,457,370 shares of common stock, par value $.01 per share (the
“Common
Stock”), of Network-1
Security Solutions, Inc. (the “Company”) issuable upon exercise of stock options
granted by the Company under its Amended and Restated 1996 Stock Option Plan
(the “Stock Option Plan”) and 2,675,361 shares of Common Stock of the Company
that may be offered or sold pursuant to 10 individual option agreements in
favor
of certain employees, officers, directors and consultants of the Company (the
“Option Agreements”), for which no registration statement has previously been
filed. Pursuant to Rule 429 under the Securities Act, the combined prospectus
included in this Registration Statement includes 1,800,000 unsold shares
included in and carried forward from the Company’s Registration Statement (No.
333-117064) filed on December 30, 1999 and 735,000 unsold shares included
in and carried forward from the Company’s Registration Statement (No. 333-64066)
filed on June 28, 2001, in addition to the 4,132,731 shares initially
registered hereunder.
(2)
Pursuant to Rule 416, this registration statement also covers such indeterminate
additional shares of Common Stock as may become issuable as a result of any
future anti-dilution adjustment in accordance with the terms of the Stock Option
Plan and the Option Agreements.
(3)
Pursuant to Rule 457 (c) and (h) promulgated under the Securities Act, includes
(i) an aggregate of 1,457,370 shares with respect to which options have been
granted under the Stock Option Plan and (ii) an aggregate of 2,675,361 shares
with respect to the Option Agreements, based on the average of the high and
low
sales prices for the shares of Common Stock as reported on The OTC Bulletin
Board on February 6, 2007 of $1.40.
Pursuant
to Rule 429 under the Securities Act, this Registration Statement contains
a
combined prospectus that covers 1,800,000 unsold shares of common stock being
carried forward from the Company’s Registration Statement No. 333-93895 and
735,000 unsold shares of Common Stock being carried forward from the Company’s
Registration Statement No. 333-64066 in addition to the 4,132,731 shares
registered hereunder. This Registration Statement also constitutes a
Post-Effective Amendment No. 1 to Registration Statement No. 333-93895 and
Registration Statement No. 333-64066.
EXPLANATORY
NOTES
On
December 30, 1999, Network-1 Security Solutions, Inc. (the “Company”)
filed a Registration Statement on Form S-8 (Registration No. 333-93895)
registering 1,800,000 shares of our Common Stock, par value $.01 per share
(the
“Common Stock”), issuable upon exercise of stock options granted under our Stock
Option Plan. On November 9, 2000, our shareholders approved an increase of
735,000 shares of Common Stock under the Stock Option Plan to a total of
2,535,000 shares. On June 28, 2001, we filed a registration statement on Form
S-8 (Registration No. 333-64066) registering an additional 735,000 shares of
our
Common Stock, par value $.01 per share (the “Common Stock”), issuable upon
exercise of stock options granted by us under the Stock Option Plan. On
November 27, 2001, our shareholders approved an increase of 1,465,000
shares of our Common Stock under the Stock Option Plan to a total of 4,000,000
shares. We have prepared this Registration Statement in accordance with the
requirements of Form S-8 under the Securities Act of 1933, as amended (the
“Securities Act”), to register an aggregate of 4,132,731 shares of our Common
Stock including 1,457,370 additional shares of Common Stock issuable upon
exercise of stock options granted under our Stock Option Plan and 2,675,361
additional shares of our Common Stock issuable pursuant to 10 individual option
agreements.
This
Form
S-8 includes a Reoffer Prospectus and is a combined prospectus pursuant to
Rule
429 of the Securities Act, relating also to Registration Statement No. 333-93895
and Registration Statement No. 333-64066, and contains the Form S-3 information
required by General Instruction C.1 for Form S-8. The Reoffer Prospectus may
be
utilized for reofferings and resales of shares of Common Stock acquired pursuant
to the Stock Option Plan and the 10 individual option agreements by selling
stockholders who may be deemed “affiliates” (as such term is defined in Rule 405
under the Securities Act) of the Company.
The
amount of securities to be offered or resold under the re-offer prospectus
by
each shareholder and any other person with whom he or she is acting in concert
for the purpose of selling our securities, may not exceed, during any three
(3)
month period, the amount specified in Rule 144(e) as promulgated under the
Securities Act of 1933, as amended.
INFORMATION
REQUIRED IN THE SECTION 10(A) PROSPECTUS
The
Company will provide documents containing the information specified in Part
1 of
Form S-8 to employees as specified by Rule 428(b)(1) under the Securities Act.
Pursuant to the instructions to Form S-8, the Company is not required to file
these documents either as part of this Registration Statement or as prospectuses
or prospectus supplements pursuant to Rule 424 under the Securities Act.
PROSPECTUS
6,667,731
SHARES
NETWORK-1
SECURITY SOLUTIONS, INC.
COMMON
STOCK ($.01 PAR VALUE)
This
prospectus relates to the reoffer and resale by certain selling stockholders
of
shares of our Common Stock that may be issued by us to the selling stockholders
upon the exercise of stock options granted under our Amended and Restated 1996
Stock Option Plan and upon exercise options issued to directors, employees
and
consultants, pursuant to 10 individual option agreements. The shares are being
reoffered and resold for the account of the selling stockholders and we will
not
receive any of the proceeds from the resale of the shares.
The
selling stockholders have advised us that the resale of their shares may be
effected from time to time in one or more transactions on the OTC Bulletin
Board, in negotiated transactions or otherwise, at market prices prevailing
at
the time of the sale or at prices otherwise negotiated. See “Plan of
Distribution.” We will bear all expenses in connection with the preparation of
this prospectus.
Our
Common Stock is traded on the OTC Bulletin Board. On February 6, 2007, the
closing price for our Common Stock, as reported by the OTC Bulletin Board,
was
$1.37.
THE
SECURITIES OFFERED IN THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD
CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER THE HEADING “RISK FACTORS”
BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE
DATE OF THIS PROSPECTUS IS FEBRUARY 12, 2007.
PAGE
ABOUT
THIS PROSPECTUS
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3
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THE
COMPANY
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3
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RISK
FACTORS
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4
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WHERE
YOU CAN FIND MORE INFORMATION
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9
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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9
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NOTE
REGARDING FORWARD-LOOKING STATEMENTS
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10
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USE
OF PROCEEDS
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11
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SELLING
STOCKHOLDERS
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11
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PLAN
OF DISTRIBUTION
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16
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LEGAL
MATTERS
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18
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EXPERTS
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DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
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This
prospectus is part of a registration statement we filed with the Securities
and
Exchange Commission (the “SEC”) and therefore omits certain information in such
registration statement. We have also filed exhibits with the registration
statement that are not included in this prospectus, and you should refer to
the
applicable exhibit for a complete description of any statement referring to
any
document. You can inspect a copy of the registration statement and its exhibits,
without charge, at the SEC’s public reference room, and can copy such material
upon paying the SEC’s prescribed rates.
You
should rely only on the information and representations provided or incorporated
by reference in this prospectus or any related supplement. We have not
authorized anyone else to provide you with different information. The Selling
Stockholders will not make an offer of these shares in any state where the
offer
is not permitted. You should not assume that the information in this prospectus
or any supplement is accurate as of any date other than the date on the front
of
those documents.
THE
COMPANY
Our
principal business is the acquisition, development, licensing and
protection of our intellectual property. We presently own six patents
covering various telecommunications and data networking technologies.
Our
strategy is to pursue licensing and strategic business alliances
with
companies in industries that manufacture and sell products that make
use
of the technologies underlying our patents as well as with other
users of
the technologies who benefit directly from the technologies including
corporate, educational and governmental entities.
In
February 2004, we initiated licensing efforts relating to one of
our
patents (U.S. Patent No. 6,218,930) covering the remote delivery
of power
over Ethernet cables (the “Remote Power Patent”). We have focused, and
will continue to focus, our efforts on licensing our Remote Power
Patent.
As of the date of this prospectus, we have not entered into any license
agreements with respect to our Remote Power Patent. During the next
12
months, our management does not anticipate licensing efforts for
our other
patents besides the Remote Power Patent. Our Remote Power Patent
relates
to, among other things, several key technologies underlying the IEEE
803.3af Power Over Ethernet standard that was approved on June 13,
2003 by
the Institute of Electrical and Electronic Engineers. This standard
governs the delivery of power over Ethernet cables in order to remotely
power network connected devices, including wireless switches, wireless
access points, RFID card readers, VOIP telephones, enterprise LAN
switches
and network cameras.
Our
future success is largely dependent upon our proprietary technologies,
our
ability to protect our intellectual property rights and to enter
into
license agreements for our technology. In addition to our patent
litigation against D-Link Corporation and D-Link Systems, Incorporated
for
infringement of our Remote Power Patent as described below, it may
be
necessary for us to commence patent litigation against additional
third
parties whom we believe require a license to our patents. We also
may be
subject to third party claims seeking to invalidate our patents.
On
August 10, 2005, we commenced patent litigation against D-Link Corporation
and D-Link Systems, Incorporated in the United States District Court
for
the Eastern District of Texas, Tyler division (Civil Action No. 6:05W291),
for infringement of our Remote Power Patent. Our complaint seeks,
among
other things, a judgment that our Remote Power Patent is enforceable
and
has been infringed by the defendants. We are also seeking a permanent
injunction restraining the defendants from continued infringement,
or
active inducement of infringement by others, of our Remote Power
Patent.
In the event the Court determines that our Remote Power Patent was
not
valid or enforceable and/or that the defendants did not infringe,
any such
determination would have a material adverse effect on our
company.
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We
were incorporated under the laws of the State of Delaware in July
1990.
Our executive offices are located at 445 Park Avenue, Suite 1028,
New
York, New York 10022 and our telephone number at that address is
(212)
829-5700. Our web site can be found at
http://www.network-1.com.
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An
investment in our Common Stock involves a high degree of risk. The risk factors
listed below are those that we consider to be material to an investment in
our
Common Stock and those which, if realized, could have material adverse effects
on our business, financial condition or results of operations as specifically
discussed below. In such an event, the trading price of our Common Stock could
decline, and you could lose all or part of your investment. Before you invest
in
our Common Stock, you should be aware of various risks, including those
described below. You should carefully consider these risk factors, together
with
all of the other information included or incorporated by reference in this
prospectus, before you decide whether to purchase our Common Stock. This section
includes or refers to certain forward-looking statements. You should refer
to
the explanation of the qualifications and limitations on such forward-looking
statements discussed on page 10.
We
have a history of losses and no revenue from current
operations.
We
have
incurred substantial operating losses since our inception, which has resulted
in
an accumulated deficit of $(45,377,000) as of September 30, 2006. For the years
ended December 31, 2005 and 2004, we incurred net losses of $(1,332,000) and
$(1,953,000), respectively. For the nine months ended September 30, 2006, we
incurred a net loss of $(1,056,000). We have financed our operations primarily
by sales of equity securities. Since December 2002, when we discontinued our
security software products and following the commencement of our patent
technology licensing business in November 2003, we have had no material revenue
from operations for the years ended December 31, 2004, December 31, 2005 and
for
the nine months ended September 30, 2006. Our ability to achieve revenue
and generate positive cash flow from operations is dependent upon consummating
licensing agreements with respect to our patented technologies. We may not
be
successful in achieving licensing agreements with third parties and our failure
to do so would have a material adverse effect on our business, financial
condition and results of operations. We may not be able to achieve revenue
or
generate positive cash flow from operations from our licensing
business.
We
could be required to stop operations if we are unable to develop our technology
licensing business or raise capital when needed.
We
anticipate, based on our currently proposed plans and assumptions relating
to
our operations (including the timetable of, costs and expenses associated with
our continued operations), that our cash position of $2,129,000 at September
30,
2006 will more likely than not be sufficient to satisfy our operations and
capital requirements until December 2007. However, we may expend our funds
prior
thereto. In the event our plans change, or our assumptions change or prove
to be
inaccurate (due to unanticipated expenses, difficulties, delays or otherwise),
we could have insufficient funds to support our operations prior to December
2007. Our inability to obtain additional financing when needed,
absent
generating sufficient cash from licensing arrangements,
would
have a material adverse effect on the Company, requiring us to curtail or
possibly cease our operations. In addition, any additional equity financing
may
involve substantial dilution to the interests of our then existing stockholders.
Our
licensing business may not be successful.
In
November 2003, we entered the technology licensing business following our
acquisition of six patents relating to various telecommunications and data
networking technologies including, among others, patents covering the delivery
of remote power over Ethernet and the transmission of audio, video and data
over
computer and telephony networks. Accordingly, we have a limited history in
the
technology licensing business upon which an evaluation of our prospects and
future performance can be made. Our prospects must be considered in light of
the
risks, expenses and difficulties frequently encountered in the development,
operation and expansion of a new business based on patented technologies in
a
highly specialized and competitive market. We may not be able to achieve revenue
or profitable operations from our licensing business.
Our
future source of licensing revenue is uncertain.
In
February 2004, we initiated our first licensing efforts relating to the
technologies in our remote power patent (U.S. Patent No. 6,218,930) (the “Remote
Power Patent”). To date, we have not entered into any licensing agreements with
third parties with respect to our Remote Power Patent or our other patented
technologies. Our inability to consummate licensing agreements and achieve
revenue from our patented technologies would have a material adverse effect
on
our operations and our ability to continue our business. In addition, in the
event we consummate license arrangements with third parties, such arrangements
are not likely to produce a stable or predictable stream of revenue in the
foreseeable future. Furthermore, the success of our licensing efforts
depends
upon the
strength of our intellectual property rights.
We
are currently relying upon the efforts of ThinkFire to consummate licensing
agreements for our Remote Power Patent with certain select potential
licensees.
On
November 30, 2004, we entered into a Master Services Agreement (the “Agreement”)
with ThinkFire Services USA, Ltd. (“ThinkFire”) pursuant to which we granted
ThinkFire the exclusive (except for us and related companies) worldwide rights
to negotiate license agreements for our Remote Power Patent with respect to
certain potential licensees agreed to between the parties. Either we or
ThinkFire can terminate the Agreement upon 60 days notice for any reason or
upon
30 days notice in the event of a material breach. We have agreed to pay
ThinkFire a fee not to exceed 20% of the royalty payments received from license
agreements consummated by ThinkFire on our behalf. ThinkFire may not be
successful in consummating license agreements on our behalf and even if such
agreements are consummated they may not result in significant royalty payments
to us.
Our
success is dependent upon our ability to protect our proprietary
technologies.
Our
success is substantially dependent upon our proprietary technologies and our
ability to protect our intellectual property rights. We currently hold 6 patents
issued by the U.S. Patent Office that relate to various telecommunications
and
data networking technologies and include among other things, patents covering
the transmission of audio, voice and data over computer and telephony networks
and the delivery of remote PoE networks. We rely upon our patents and trade
secret laws, non-disclosure agreements with our employees, consultants and
third
parties to protect our intellectual property rights. The complexity of patent
and common law, combined with our limited resources, create risk that our
efforts to protect our proprietary technologies may not be successful. We cannot
assure you that our patents will be upheld or that third parties will not
invalidate our patent rights. In the event our intellectual property rights
are
not upheld, such an event would have a material adverse effect on
us.
We
are currently relying upon our contingency fee agreement with Blank
Rome.
In
August
2005, we entered into an agreement with Blank Rome, LLP (“Blank Rome”), a
national law firm, pursuant to which Blank Rome has been engaged to represent
us
in connection with all litigation involving our Remote Power Patent. Blank
Rome
has agreed to represent us with respect to each litigation pertaining to the
Remote Power Patent on a full contingency basis (except for any proceeding
before the International Trade Commission). As compensation for its services
on
a full contingency basis, Blank Rome will receive from us percentages of Net
Consideration (as defined in the Agreement) ranging from 12.5% to 35% received
by us by way of settlement or judgment in connection with each litigation
matter. We have also agreed to compensate Blank Rome in an amount equal to
10%
of the Net Consideration received by us from certain designated parties mutually
agreed upon by us and Blank Rome (the “Designated Parties”) in the event that
prior to commencement of litigation such Designated Parties enter into license
agreements or similar agreements with us during the period of Blank Rome’s
engagement.
The
Agreement may be terminated by either Blank Rome or us upon 30 days notice.
If
we elect to terminate the Agreement, we will compensate Blank Rome in an amount
equal to 5% of the Net Consideration received by us from the Designated Parties
with whom Blank Rome has not commenced litigation on our behalf, provided that
such parties had substantive licensing or settlement discussions related to
our
Remote Power Patent during the term of the Agreement and entered into a license
agreement or similar agreement with us providing for Net Consideration within
the 12 month period following termination. In addition, in the event of
termination, Blank Rome will receive its pro-rata share of Net Consideration
based upon its hourly time charges with respect to parties against whom Blank
Rome commenced litigation (or defended) on our behalf. In the event our
agreement with Blank Rome is terminated, depending upon our financial resources
at the time, we may need to enter into a contingent fee agreement with a new
law
firm in order to enforce and/or defend our Remote Power Patent and our inability
to secure such an arrangement on satisfactory terms and on a timely basis may
have a material adverse effect on us.
Any
litigation to protect our intellectual property or any third party claims to
invalidate our patents could have a material adverse effect on our
business.
Our
success depends on our ability to protect our intellectual property rights.
In
August 2005, we commenced patent litigation against D-Link Corporation and
D-Link Systems, Incorporated for infringement of our Remote Power Patent (see
below Risk Factors - “We face uncertainty of outcome of litigation with
D-Link”). In the future, it may be necessary for us to commence patent
litigation against additional third parties whom we believe require a license
to
our patents. In addition, we may be subject to claims seeking to invalidate
our
patents, as has been asserted by D-Link as a defense in the pending litigation.
These types of claims, with or without merit, may subject us to costly
litigation and diversion of management’s focus. If we are unsuccessful in
enforcing and validating our patents and/or if third parties making claims
against us seeking to invalidate our patents are successful, they may be able
to
obtain injunctive or other equitable relief, which effectively could block
our
ability to license or otherwise capitalize on our proprietary technologies.
Successful litigation against us resulting in a determination that our patents
are invalid would have a material adverse effect on us.
We
face uncertainty as to the outcome of litigation with
D-Link.
On
August
10, 2005, we commenced litigation against D-Link Corporation and D-Link Systems,
Incorporated in the United States District Court for the Eastern District of
Texas, Tyler division (Civil Action No. 6:05W291), for infringement of our
Remote Power Patent. Our complaint seeks, among other things, a judgment that
our Remote Power Patent is duly enforceable and has been infringed by the
defendants. We also seek a permanent injunction restraining defendants from
continued infringement, or active inducement of infringement by others, of
our
Remote Power Patent. On February 27, 2006, the D-Link defendants filed answers
and asserted counterclaims. In their answers, the D-Link defendants asserted
that they did not infringe any valid claim of our Remote Power Patent, and
further asserted that our asserted patent claims are invalid and/or
unenforceable. In addition to these defenses, the D-Link defendants also
asserted counterclaims for, among other things, non-infringement, invalidity
and
unenforceability of the Remote Power Patent.
Material
licensing revenues from our Remote Power Patent may be dependent upon the
applicability of the IEEE Standard.
The
Institute of Electrical and Electronic Engineers (IEEE) is a non-profit,
technical professional association of more than 360,000 individual members
in
approximately 175 countries. The Standards Association of the IEEE is
responsible for the creation of global industry standards for a broad range
of
technology industries. In 1999, the IEEE formed a task force to facilitate
the
adoption of a standardized methodology for the delivery of remote power over
Ethernet networks which would insure interoperability among vendors of switches
and terminal devices. In June 2003, the IEEE Standards Association approved
the
802.3af Power Over Ethernet standard (the “Standard”), which covers technologies
deployed in delivering power over Ethernet cables including whether deployed
in
switches or as standalone midspan hubs both of which provide power to remote
devices including wireless access points, IP phones and network based cameras.
The technology is commonly referred to as Power Over Ethernet (“PoE”). We
believe our Remote Power Patent covers several of the key technologies covered
by the Standard. However, there is a risk that as a result of litigation a
court
may determine otherwise and such a determination would have a material adverse
effect on our ability to enter into license agreements and achieve revenue
and
profits from our Remote Power Patent.
We
face intense competition and we may not be able to successfully
compete.
The
telecommunications and data networking market is characterized by intense
competition and rapidly changing business conditions, customer requirements
and
technologies. Our current and potential competitors have longer operating
histories, greater name recognition and possess substantially greater financial,
technical, marketing and other competitive resources than us. Although we
believe that we have rights to enforceable patents relating to
telecommunications and data networking, there can be no assurance that third
parties will not invalidate any or all of our patents. In addition, the
telecommunications and data networking industries may develop technologies
that
may be more effective than our proprietary technologies or that render our
technologies less marketable or obsolete.
Our
markets are subject to rapid technological change and our technologies face
potential technology obsolescence.
The
telecommunications and data networking technology market including, transmission
of audio, video and data over computer and telephony networks and the delivery
of remote power over Ethernet markets, are characterized by rapid technological
changes, changing customer requirements, frequent new product introductions
and
enhancements, and evolving industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards may
render our technologies obsolete or less marketable. To the extent we are able
to achieve revenue in the future, such revenue will be derived from licensing
our technologies based on existing and evolving industry standards.
Dependence
upon CEO and Chairman.
Our
success is largely dependent upon the personal efforts of Corey M. Horowitz,
our
Chairman and Chief Executive Officer and Chairman of the Board of Directors.
The
loss of the services of Mr. Horowitz would have a material adverse effect on
our
business and prospects. We are currently negotiating with Mr. Horowitz the
terms of a new employment agreement as his employment agreement expired in
November 2006. We do not maintain key-man life insurance on the life of Mr.
Horowitz.
Risks
related to
low priced
stocks.
Our
common stock currently trades on the OTC
Bulletin Board under the symbol NSSI. Since
the
trading price of our common stock is below $5.00 per share, our common stock
is
considered a penny stock. SEC regulations generally define a penny stock to
be
an equity security that is not listed on Nasdaq or a national securities
exchange and that has a market value of less than $5.00 per share, subject
to
certain exceptions. SEC regulations require broker-dealers to deliver to a
purchaser of our common stock a disclosure schedule explaining the penny stock
market and the risks associated with it. Various sales practice requirements
are
also imposed on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors (generally institutions).
Broker-dealers must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and
monthly account statements disclosing recent price information for the penny
stock held in the customer’s account.
The
significant number of options and warrants outstanding may adversely effect
the
market price for our common stock.
As
of
February 1, 2007, there are outstanding options and warrants to purchase an
aggregate of 9,281,481 shares of our common stock at exercise prices ranging
from $.12 to $10.00. To the extent that outstanding options and warrants are
exercised, stockholder percentage ownership will be diluted and any sales in
the
public market of the common stock underlying such options may adversely affect
prevailing market prices for our common stock.
We
have a significant amount of authorized but unissued preferred stock, which
may
affect the likelihood of a change of control in our
company.
Our
Board
of Directors has the authority, without further action by the stockholders,
to
issue 10,000,000 shares of preferred stock on such terms and with such rights,
preferences and designations as our Board of Directors may determine. Such
terms
may include restricting dividends on our common stock, dilution of the voting
power of our common stock or impairing the liquidation rights of the holders
of
our common stock. Issuance of such preferred stock, depending on the rights,
preferences and designations thereof, may have the effect of delaying, deterring
or preventing a change in control. In addition, certain “anti-takeover”
provisions in Delaware law may restrict the ability of our stockholders to
authorize a merger, business combination or change of control.
In
the
event that the Court determines that our Remote Power Patent was not valid
or
enforceable and/or that the defendants did not infringe, any such determination
would have a material adverse effect on us.
Our
stock price may be volatile.
The
market price of our common stock is likely to be highly volatile and could
fluctuate widely in price in response to various factors, many of which are
beyond our control, including the following:
· |
our
ability to successfully enforce and/or defend our Remote Power
Patent;
|
·
|
our
ability to enter into favorable license agreements with third parties
with
respect to our Remote Power Patent;
|
·
|
our
ability to achieve revenues and
profits;
|
·
|
our
ability to raise capital when
needed;
|
·
|
sales
of our common stock;
|
·
|
our
ability to execute our business
plan;
|
· |
legislative,
regulatory and competitive developments;
and
|
·
|
economic
and other external factors.
|
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 materially and
adversely affect the market price of our common stock.
Sales
of a substantial number of shares of our common stock may cause the price of
our
common stock to decline.
We
have
registered for resale 22,453,987 shares of common stock, including shares
issuable upon exercise of outstanding options and warrants that are not
currently freely tradable. If our stockholders sell substantial amounts of
our
common stock in the public market, including shares issued upon the exercise
of
outstanding options and warrants, the market price of our common stock could
fall. These sales also may make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
reasonable or appropriate.
Additional
stock offerings may dilute current stockholders.
We
may
need to issue additional shares of our capital stock or securities convertible
or exercisable for shares of our capital stock, including preferred stock,
options or warrants. The issuance of additional capital stock may dilute the
ownership of our current stockholders.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, and other information with the SEC.
You
may read and copy any document we file at the SEC’s public reference room
located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The
SEC has prescribed rates for copying. You may obtain further information on
the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Our
SEC filings are also available to the public over the Internet at the SEC’s web
site at http://www.sec.gov.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
SEC
allows us to “incorporate by reference” the information we file with them, which
means that we can disclose important information to you by referring you to
those documents. The information we incorporate by reference is considered
to be
a part of this prospectus and information that we file later with the SEC will
automatically update and replace the information in this prospectus.
Accordingly, we incorporate by reference the documents listed below and any
future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of
the Securities Exchange Act of 1934, as amended:
1.
|
Our
Annual Report on Form 10-KSB for the year ended December 31, 2005
(filed
April 12, 2006);
|
2.
|
Our
current reports on Form 8-K and Form 8-K/A filed on February 8, 2006,
February 9, 2006, February 15, 2006, March 31, 2006,
April 17, 2006, May 16, 2006, August 7, 2006,
September 14, 2006, November 15,
2006, November 28, 2006 and December 22, 2006;
|
3.
|
Our
Quarterly Report on Form 10-QSB for the period ended March 31, 2006,
June 30, 2006 and September 30, 2006 (filed May 15, 2006,
August 3, 2006 and November 14, 2006);
and
|
4.
|
The
description of our Common Stock incorporated by reference in our
Registration Statement on Form 8-A (filed October 9, 1998), as amended
on
November 3, 1998.
|
All
documents subsequently filed by the Company pursuant to Section 13(a), 13(c)
or
15(d) of the Securities Exchange Act of 1934, as amended, prior to the filing
of
a post-effective amendment to the Registration Statement which indicates that
all shares of Common Stock offered hereunder have been sold or which deregisters
all shares then remaining unsold, shall be deemed to be incorporated herein
by
reference and to be part hereof from the date of filing of such documents.
Any
statement contained in a document incorporated or deemed to be incorporated
by
reference herein shall be deemed to be modified or superseded for purposes
of
this Registration Statement to the extent that a statement contained herein
or
in any other subsequently filed document which is also or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Registration Statement.
We
will
provide at no cost to each person to whom this prospectus is delivered, upon
written or oral request, a copy of any of these filings, excluding the exhibits
to such filings that we have not specifically incorporated by reference in
such
filings. You should direct such requests to us at 445 Park Avenue, Suite 1028,
New York, New York 10021, Attention: Corey M. Horowitz, Chairman and Chief
Executive Officer, telephone number (212) 829-5770.
This
prospectus contains certain forward-looking statements that are statements
that
include information based upon beliefs of our management, as well as assumptions
made by and information available to our management. Statements containing
terms
such as “believes,” “expects,” “anticipates,” “intends” or similar words are
intended to identify forward-looking statements.
Our
management, based upon assumptions they consider reasonable, has compiled these
forward-looking statements. Such statements reflect our current views with
respect to future events. These statements involve known and unknown risks
and
uncertainties that may cause our actual results in future periods to differ
materially from what is currently anticipated. We make cautionary statements
in
certain sections of this prospectus, including under “Risk Factors.” You should
read these cautionary statements as being applicable to all related
forward-looking statements wherever they appear in this prospectus, the
materials referred to in this prospectus or the materials incorporated by
reference into this prospectus.
You
are
cautioned that no forward-looking statement is a guarantee of future performance
and you should not place undue reliance on any forward-looking statement. Such
statements speak only as of the date of this prospectus and we are not
undertaking any obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
of
this prospectus or to reflect the occurrence of unanticipated events.
The
shares of common stock offered by this prospectus are being registered for
the
account of the selling stockholders identified in this prospectus. See “Selling
Shareholders.” All net proceeds from the sale of common shares will go to the
shareholders who offer and sell their shares. We will not receive any part
of
the proceeds from such sales. We will, however, receive the exercise price
of
the options at the time of their exercise (exclusive of options to purchase
4,295,361 shares which may be exercised on a “cashless” basis). If all of the
options are exercised (assuming no exercise on a “cashless” basis), we will
realize proceeds in the amount of $4,933,656. Such proceeds will be contributed
to working capital and will be used for general corporate purposes.
This
prospectus relates to the reoffer and resale of shares of common stock (“Common
Stock”) issued or that may be issued to the selling stockholders under our Stock
Option Plan and other options issued to officers, directors, employees and
consultants pursuant to 10 individual option agreements. The following table
sets forth (i) the number of shares of Common Stock beneficially owned by each
selling stockholder as of the date of this prospectus, (ii) the number of shares
to be offered for resale by each selling stockholder (i.e., the total number
of
shares underlying options held by each selling stockholder irrespective of
whether such options are presently exercisable or exercisable within sixty
days
of the date of this prospectus), and (iii) the number and percentage of shares
of our Common Stock to be held by each selling stockholder after completion
of
the offering.
NAME
|
|
NUMBER
OF SHARES BENEFICIALLY OWNED PRIOR TO OFFERING(1)
|
|
NUMBER
OF SHARES BEING OFFERED(2)
|
|
NUMBER
OF SHARES OF BENEFICIALLY OWNED AFTER OFFERING(3)
|
|
PERCENTAGE
OUTSTANDING COMMON STOCK AFTER OFFERING(3)
|
|
|
|
|
|
|
|
|
|
Corey
M. Horowitz
|
|
8,684,226(5)
|
|
4,348,486(6)
|
|
4,335,740
|
|
21.2%
|
Barry
Rubenstein
|
|
3,743,251(7)
|
|
59,375(8)
|
|
3,683,876
|
|
19.3%
|
Irwin
Lieber
|
|
2,048,338(9)
|
|
59,375(10)
|
|
1,988,963
|
|
10.4%
|
Robert
Graifman
|
|
341,027(11)
|
|
115,000(12)
|
|
226,027
|
|
1.2%
|
Harry
Schessel
|
|
132,500(13)
|
|
140,000(14)
|
|
0
|
|
0
|
Jon
Greene
|
|
117,500(15)
|
|
167,500(16)
|
|
0
|
|
0
|
David
Kahn
|
|
160,625(17)
|
|
200,000(18)
|
|
0
|
|
0
|
Murray
Fish
|
|
100,000(19)
|
|
100,000
|
|
0
|
|
0
|
Laurent
Ohana
|
|
150,000(20)
|
|
100,000(21)
|
|
50,000
|
|
*
|
Edward
James
|
|
75,000(22)
|
|
75,000
|
|
0
|
|
0
|
Emanuel
Pearlman
|
|
66,250(23)
|
|
66,250
|
|
0
|
|
0
|
Mark
Tuomenoska
|
|
60,000(24)
|
|
60,000
|
|
0
|
|
0
|
Jonathan
Mark
|
|
60,000(25)
|
|
60,000
|
|
0
|
|
0
|
Robert
Pons
|
|
100,000(26)
|
|
100,000
|
|
0
|
|
0
|
Daniel
Geer
|
|
20,000(27)
|
|
20,000
|
|
0
|
|
0
|
Jonathan
Maslow
|
|
50,000(28)
|
|
50,000
|
|
0
|
|
0
|
George
Conant
|
|
17,500(29)
|
|
17,500
|
|
0
|
|
0
|
Ronald
Keenan
|
|
17,500(30)
|
|
17,500
|
|
0
|
|
0
|
Andrew
Maslow
|
|
17,500(31)
|
|
17,500
|
|
0
|
|
0
|
Robert
Rosenbaum
|
|
16,800(32)
|
|
16,800
|
|
0
|
|
0
|
William
Hancock
|
|
15,000(33)
|
|
15,000
|
|
0
|
|
0
|
Robert
Russo
|
|
15,000(34)
|
|
15,000
|
|
0
|
|
0
|
Sam
Schwartz
|
|
36,084(35)
|
|
12,500
|
|
23,584
|
|
*
|
Michael
Matthews
|
|
11,594(36)
|
|
11,594
|
|
0
|
|
0
|
Brad
Taylor
|
|
10,937(37)
|
|
10,937
|
|
0
|
|
0
|
Kenneth
Conquest
|
|
10,000(38)
|
|
10,000
|
|
0
|
|
0
|
Marcus
Ranum
|
|
8,575(39)
|
|
8,575
|
|
0
|
|
0
|
Michael
Metzler
|
|
7,812(40)
|
|
7,812
|
|
0
|
|
0
|
Al
Maguire
|
|
7,600(41)
|
|
7,600
|
|
0
|
|
0
|
Gustin
Partners
|
|
7,500(42)
|
|
7,500
|
|
0
|
|
0
|
Marty
Dorfman
|
|
6,500(43)
|
|
6,500
|
|
0
|
|
0
|
Paul
Hacker
|
|
4,375(44)
|
|
4,375
|
|
0
|
|
0
|
Ethan
Hutchison
|
|
4,000(45)
|
|
4,000
|
|
0
|
|
0
|
Lauren
Whitehouse
|
|
2,500(46)
|
|
2,500
|
|
0
|
|
0
|
Christie
Rotter
|
|
1,552(46)
|
|
1,552
|
|
0
|
|
0
|
Hiroyuki
Nozawa
|
|
2,000(47)
|
|
2,000
|
|
0
|
|
0
|
|
|
|
|
|
|
|
|
|
*
Less
than 1%
(1)
|
Unless
otherwise indicated, the Company believes that all persons named
in the
above table have sole voting and investment power with respect to
all
shares of Common Stock beneficially owned by them. A person is deemed
to
be the beneficial owner of securities that can be acquired by such
person
within 60 days from the date hereof upon the exercise of options,
warrants
or convertible securities. Each beneficial owner’s percentage ownership is
determined by assuming that options, warrants and convertible securities
held by such person (but not those held by any other person) and
which are
exercisable or convertible within 60 days have been exercised and
converted.
|
(2)
|
Consists
of shares issuable upon the exercise of options both currently exercisable
and not currently exercisable.
|
(3)
|
Beneficial
ownership of shares held by each selling stockholder after this offering
assumes that each selling stockholder sold all of the shares it is
offering in this prospectus but actually will depend on the number
of
shares sold by such selling stockholder in this
offering.
|
(4)
|
Assumes
a base of 19,764,724 shares of Common Stock
outstanding.
|
(5)
|
Includes
(i) 381,303 shares of Common Stock held by Mr. Horowitz, (ii) 4,337,861
shares of Common Stock subject to currently exercisable stock options
held
by Mr. Horowitz, (iii) 2,467,800 shares of Common Stock held by CMH
Capital Management Corp. (“CMH”), an entity solely owned by Mr. Horowitz,
(iv) 550,000 shares of Common Stock subject to currently exercisable
warrants held by CMH, (v) 750,000 shares of Common Stock subject
to
currently exercisable options held by CMH, (vi) 67,471 shares of
Common
Stock owned by Donna Slavitt, the wife of Mr. Horowitz, (vii) 127,500
shares of Common Stock held by two trusts and a custodian account
for the
benefit of Mr. Horowitz’s three children and (viii) 2,291 shares of Common
Stock held by Horowitz Partners, a general partnership of which Mr.
Horowitz is a partner. Does not include options to purchase 10,625
shares
of Common Stock which are not currently exercisable. The address
of CMH
Capital Management Corp. is 445 Park Avenue, New York, New York
10022.
|
(6)
|
Includes
4,337,861 shares of Common Stock subject to currently exercisable
stock
options held by Mr. Horowitz and 10,625 shares of Common Stock
subject to stock options not currently
exercisable.
|
(7)
|
Includes
(i) 1,280,207 shares of Common Stock held by Wheatley Partners II,
L.P.,
(ii) 194,280 shares of Common Stock held by Wheatley Partners, L.P.,
(iii)
16,868 shares of Common Stock held by Wheatley Foreign Partners,
L.P.,
(iv) 150,012 shares of Common Stock held by Mr. Rubenstein, (v) 47,500
shares of Common Stock subject to currently exercisable stock options
held
by Mr. Rubenstein, and (vi) 829,226, 619,983, 309,316, 294,810 and
1,049
shares of Common Stock held by Woodland Venture Fund, Seneca Ventures,
Woodland Partners, Brookwood Partners, L.P. and Marilyn Rubenstein,
respectively. Does not include options to purchase 11,875 shares
of Common
Stock held by Mr. Rubenstein which are not currently exercisable.
The
aforementioned beneficial ownership by Mr. Rubenstein is based upon
Amendment No. 6 to Schedule 13D jointly filed by Mr. Rubenstein and
related parties with the Securities and Exchange Commission on January
3,
2005 and Form 4s filed by Mr. Rubenstein with the Securities and
Exchange
Commission on December 21, 2004 and February 17, 2005. Barry Rubenstein
is
a general partner of Wheatley Partners II, L.P. and a member of the
general partner of each of Wheatley Partners, L.P. and Wheatley Foreign
Partners, L.P. Barry Rubenstein and Woodland Services Corp. are the
general partners of Woodland Venture Fund and Seneca Ventures. Barry
Rubenstein is the President and sole director of Woodland Services
Corp.
Marilyn Rubenstein is the wife of Barry Rubenstein. Mr. Rubenstein
disclaims beneficial ownership of the shares of Common Stock held
by
Wheatley Partners II, L.P., Wheatley Partners, L.P. and Wheatley
Foreign
Partners, L.P., except to the extent of his equity interest therein.
The
address of Barry Rubenstein is 68 Wheatley Road, Brookville, New
York
11545. The address of Wheatley Partners II, L.P. and Wheatley Partners,
L.P. is 60 Cuttermill Road, Great Neck, New York 11021. The address
of
Wheatley Foreign Partners, L.P. is c/o Fiduciary Trust, One Capital
Place,
Snedden Road, P.O. Box 162, Grand Cayman, British West Indies. The
address
for Woodland Venture Fund, Seneca Ventures, Brookwood Partners, L.P.
and
Woodland Partners is c/o Barry Rubenstein, 68 Wheatley Road, Brookville,
New York 11545.
|
(8)
|
Includes
47,500 shares of Common Stock to currently exercisable stock options
and
11,875 shares of Common Stock subject to stock options not currently
exercisable.
|
(9)
|
Includes
(i) 1,280,207 shares of Common Stock held by Wheatley Partners II,
L.P.,
(ii) 194,280 shares of Common Stock held by Wheatley Partners, L.P.,
(iii) 16,868 shares of Common Stock held by Wheatley Foreign Partners,
L.P., (iv) 509,483 shares of Common Stock owned by Mr. Lieber, and
(v)
47,500 shares of Common Stock subject to currently exercisable stock
options owned by Mr. Lieber. Does not include options to purchase
11,875
shares of Common Stock owned by Mr. Lieber which are not currently
exercisable. The aforementioned beneficial ownership by Mr. Lieber
is
based upon Amendment No. 6 to Schedule 13D jointly filed by Mr. Lieber
and
related parties with Securities and Exchange Commission on January
3, 2005
and Form 4s filed with the Securities and Exchange Commission on
December
21, 2004 and February 17, 2005. Mr. Lieber disclaims beneficial ownership
of the shares of Common Stock held by Wheatley Partners II, L.P.,
Wheatley
Partners, L.P. and Wheatley Foreign Partners, L.P., except to the
extent
of his equity interest therein. The address of Irwin Lieber is c/o
Wheatley Partners, II, L.P., 80 Cuttermill Road, Great Neck, New
York
11021.
|
(10) |
Includes
47,500 shares of Common Stock subject to currently exercisable stock
options and 11,875 shares of Common Stock subject to stock options
not
currently exercisable.
|
(11)
|
Includes
(i) 154,777 shares of Common Stock, (ii) 75,000 shares subject to
currently exercisable warrants and (iii) 111,250 shares subject to
currently exercisable stock options issued to Mr. Graifman. Does
not
include options to purchase 3,750 shares of Common Stock which are
not
currently exercisable.
|
(12)
|
Includes
111,250 shares subject to currently exercisable stock options issued
to
Mr. Graifman and 3,750 shares of Common Stock subject to stock
options not currently exercisable.
|
(13)
|
Includes
132,500 shares of Common Stock subject to currently exercisable stock
options issued to Mr. Schessel. Does not include options to purchase
7,500
shares of Common Stock which are not currently
exercisable.
|
(14)
|
Includes
132,500 shares subject to currently exercisable stock options issued
to
Mr. Schessel and 7,500 shares of Common Stock subject to options
which are not currently
exercisable.
|
(15)
|
Includes
117,500 shares of Common Stock subject to currently exercisable options.
Does not include options to purchase 50,000 shares of Common Stock
which
are not currently exercisable.
|
(16)
|
Includes
117,500 shares of Common Stock subject to currently exercisable options
issued to Mr. Greene and 50,000 shares of Common Stock subject to
options which are not currently
exercisable.
|
(17)
|
Includes
160,625 shares of Common Stock subject to currently exercisable stock
options issued to Mr. Kahn. Does not include options to purchase
39,375
shares of Common Stock which are not currently
exercisable.
|
(18)
|
Includes
160,625 shares of Common Stock subject to currently exercisable options
and 39,375 shares of Common Stock subject to options which are not
currently exercisable.
|
(19)
|
Includes
100,000 shares of Common Stock subject to currently exercisable
options.
|
(20)
|
Includes
150,000 shares of Common Stock subject to currently exercisable options
and warrants issued to Mr. Ohana.
|
(21)
|
Includes
100,000 shares of Common Stock subject to currently exercisable options
issued to Mr. Ohana.
|
(22)
|
Includes
75,000 shares of Common Stock subject to currently exercisable
options.
|
(23)
|
Includes
66,250 shares of Common Stock subject to currently exercisable
options.
|
(24)
|
Includes
60,000 shares of Common Stock subject to currently exercisable
options.
|
(25)
|
Includes
60,000 shares of Common Stock subject to currently exercisable
options.
|
(26)
|
Includes
100,000 shares of Common Stock subject to currently exercisable
options.
|
(27)
|
Includes
20,000 shares of Common Stock subject to currently exercisable
options.
|
(28)
|
Includes
50,000 shares of Common Stock subject to currently exercisable
options.
|
(29)
|
Includes
17,500 shares of Common Stock subject to currently exercisable
options.
|
(30)
|
Includes
17,500 shares of Common Stock subject to currently exercisable
options.
|
(31)
|
Includes
17,500 shares of Common Stock subject to currently exercisable
options.
|
(32)
|
Includes
16,800 shares of Common Stock subject to currently exercisable
options.
|
(33)
|
Includes
15,000 shares of Common Stock subject to currently exercisable
options.
|
(34)
|
Includes
15,000 shares of Common Stock subject to currently exercisable
options.
|
(35)
|
Includes
12,500 shares of Common Stock subject to currently exercisable
options.
|
(36)
|
Includes
11,594 shares of Common Stock subject to currently exercisable
options.
|
(37)
|
Includes
10,937 shares of Common Stock subject to currently exercisable
options.
|
(38)
|
Includes
10,000 shares of Common Stock subject to currently exercisable
options.
|
(39)
|
Includes
8,575 shares of Common Stock subject to currently exercisable
options.
|
(40)
|
Includes
7,812 shares of Common Stock subject to currently exercisable
options.
|
(41)
|
Includes
7,600 shares of Common Stock subject to currently exercisable
options.
|
(42)
|
Includes
7,500 shares of Common Stock subject to currently exercisable
options.
|
(43)
|
Includes
6,500 shares of Common Stock subject to currently exercisable
options.
|
(44)
|
Includes
4,375 shares of Common Stock subject to currently exercisable
options.
|
(45)
|
Includes
4,000 shares of Common Stock subject to currently exercisable
options.
|
(46)
|
Includes
2,500 shares of Common Stock subject to currently exercisable
options.
|
(47)
|
Includes
1,552 shares of Common Stock subject to currently exercisable
options.
|
(48)
|
Includes
2,000 shares of Common Stock subject to currently exercisable
options.
|
PLAN
OF DISTRIBUTION
This
offering is self-underwritten. Neither we nor the selling stockholders have
employed an underwriter for the sale of Common Stock by the selling
stockholders. We will bear all expenses in connection with the preparation
of
this prospectus. The selling stockholders will bear all expenses associated
with
the sale of their Common Stock. There can be no assurance that the selling
stockholders will sell any or all of the shares of Common Stock offered by
them
under this prospectus or otherwise.
At
the
time a selling stockholder makes an offer to sell shares, to the extent required
by the Securities Act of 1933, as amended, a prospectus will be delivered.
If a
supplemental prospectus is required, one will be delivered setting forth the
number of shares being offered and the terms of the offering.
The
selling stockholders may offer their shares of Common Stock directly or through
pledgees, donees, transferees or other successors in interest in one or more
of
the following transactions:
· |
ordinary
brokerage transactions in which the broker-dealer solicits
purchasers;
|
· |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
· |
purchases
by a broker-dealer as principal and resale by the broker-dealer for
its
account;
|
· |
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
· |
privately
negotiated transactions;
|
· |
broker-dealers
may agree with the selling stockholders to sell a specified number
of such
shares at a stipulated price per
share;
|
· |
a
combination of any such methods of sale;
and
|
· |
any
other method permitted pursuant to applicable
law.
|
The
selling stockholders may offer their shares of Common Stock at any of the
following prices:
· |
fixed
prices that may be changed;
|
· |
market
prices prevailing at the time of
sale;
|
· |
prices
related to such prevailing market prices;
and
|
The
selling stockholders may effect transactions by selling shares to or through
broker-dealers, and all such broker-dealers may receive compensation in the
form
of discounts, concessions, or commissions from the selling stockholders and/or
the purchasers of shares of Common Stock for whom such broker-dealers may act
as
agents or to whom they sell as principals, or both (which compensation as to
a
particular broker-dealer might be in excess of customary
commissions).
Any
broker-dealer acquiring Common Stock from the selling stockholders may sell
the
shares either directly, in its normal market-making activities, through or
to
other brokers on a principal or agency basis or to its customers. Any such
sales
may be at prices then prevailing on the OTC Bulletin Board or at prices related
to such prevailing market prices or at negotiated prices to its customers or
a
combination of such methods. The selling stockholders and any broker-dealers
that act in connection with the sale of the Common Stock hereunder might be
deemed to be “underwriters” within the meaning of Section 2(11) of the
Securities Act; any commission received by them and any profit on the resale
of
shares as principal might be deemed to be underwriting discounts and commissions
under the Securities Act. Any such commissions, as well as other expenses
incurred by the selling stockholders and applicable transfer taxes, are payable
by the selling stockholders.
The
selling stockholders reserve the right to accept, and together with any agent
of
the selling stockholder, to reject in whole or in part any proposed purchase
of
the shares of Common Stock. The selling stockholders will pay any sales
commissions or other seller’s compensation applicable to such
transactions.
Since
we
do not satisfy the registrant requirements for use of Form S-3 at the time
of
filing this prospectus, the Rule 144(e) volume limitations shall be applicable
to the amount of securities to be reoffered or resold by means of this reoffer
prospectus by each person, and any other person with whom he or she is acting
in
concert for purposes of selling securities of the Company. The volume
limitations in Rule 144(e) provide for the sale within any three-month period
a
number of shares that does not exceed the greater of: (i) 1% of the number
of
shares of Common Stock then outstanding (which currently equals 197,765 as
of
the date of this prospectus) or (ii) the average weekly trading volume during
the four prior calendar weeks.
We
have
not registered or qualified offers and sales of shares of the Common Stock
under
the laws of any country other than the United States. To comply with certain
states’ securities laws, if applicable, the selling stockholders will offer and
sell their shares of Common Stock in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the selling
stockholders may not offer or sell shares of Common Stock unless we have
registered or qualified such shares for sale in such states or we have complied
with an available exemption from registration or qualification.
The
selling stockholders with respect to any purchase or sale of shares of Common
Stock are required to comply with Regulation M promulgated under the Securities
Exchange Act of 1934, as amended. In general, Rule 102 under Regulation M
prohibits any person connected with a distribution of securities (the
“Distribution”) from directly or indirectly bidding for, or purchasing for any
account in which he or she has a beneficial interest, any of such securities
or
any right to purchase such securities, for a period of one business day before
and after completion of his or her participation in the Distribution (we refer
to that time period as the “Distribution Period”).
During
the Distribution Period, Rule 104 under Regulation M prohibits the selling
stockholders and any other persons engaged in the Distribution from engaging
in
any stabilizing bid or purchasing of our Common Stock except for the purpose
of
preventing or retarding a decline in the open market price of our Common Stock.
No such person may effect any stabilizing transaction to facilitate any offering
at the market. Inasmuch as the selling shareholders will be reoffering and
reselling our Common Stock at the market, Rule 104 prohibits them from effecting
any stabilizing transaction in contravention of Rule 104 with respect of our
Common Stock.
There
can
be no assurance that the selling stockholders will sell any or all of the shares
offered by them hereunder or otherwise.
LEGAL
MATTERS
The
validity of the shares of Common Stock offered hereby have been passed upon
for
us by Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., 805 Third Avenue, New
York, New York 10022. Sam Schwartz, a partner of that firm, owns 23,584 shares
of our Common Stock and options to purchase 12,500 shares of our Common Stock
as
of the date of this prospectus.
The
financial statements for the year ended December 31, 2005 incorporated in
this prospectus by reference to the Annual Report on Form 10-KSB for the year
ended December 31, 2005 have been so incorporated in reliance on the report
of
Radin, Glass & Co., LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting. The financial statements for
the year ended December 31, 2004 incorporated in this prospectus by
reference to the Annual Report on Form 10-KSB for the year ended
December 31, 2005 have been so incorporated in reliance on the report of
Eisner LLP, an independent registered accounting firm, given on the authority
of
said firm as experts in auditing and accounting.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
Our
Certificate of Incorporation and Bylaws provide our directors with protection
for breaches of their fiduciary duties to us and
our
shareholders. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers or persons
controlling us, we have been advised that it is the SEC’s opinion that such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable.
In
the
event that a claim for indemnification against such liabilities (other than
the
payment by us of expenses incurred or paid
by a
director, officer or controlling person in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, we will, unless in the
opinion of our counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
ITEM
3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The
following documents filed by Network-1 Security Solutions, Inc. (the “Company”)
with the Securities and Exchange Commission (the “Commission”) pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the
Securities Act of 1933, as amended (the “Securities Act”), are incorporated by
reference in, and made a part of, this Registration Statement:
1. |
Our
Annual Report on Form 10-KSB for the year ended December 31, 2005
(filed
April 12, 2006);
|
2.
|
Our
current reports on Form 8-K and Form 8-K/A filed on February 8, 2006,
February 9, 2006, February 15, 2006, March 31, 2006,
April 17, 2006, May 16, 2006, August 7, 2006,
September 14, 2006, November 15,
2006, November 28, 2006 and December 22, 2006;
|
3.
|
Our
Quarterly Report on Form 10-QSB for the period ended March 31, 2006,
June 30, 2006 and September 30, 2006 (filed May 15, 2006,
August 3, 2006 and November 14, 2006);
and
|
4.
|
The
description of our Common Stock incorporated by reference in our
Registration Statement on Form 8-A (filed October 9, 1998), as amended
on
November 3, 1998.
|
All
reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing
of
a post-effective amendment that indicates that all shares of Common Stock
offered hereby have been sold or which deregisters all shares then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing of such reports and
other documents. Any statement contained in a document incorporated or deemed
to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not
be
deemed, except as so modified or superseded, to constitute a part of this
Registration Statement.
We
will
provide at no cost to each person to whom this prospectus is delivered, upon
written or oral request, a copy of any of these filings, excluding the exhibits
to such filings that we have not specifically incorporated by reference in
such
filings. You should direct such requests to us at 445 Park Avenue, Suite 1028,
New York, New York 10021, Attention: Corey M. Horowitz, Chairman and Chief
Executive Officer, telephone number (212) 829-5770.
Not
applicable.
ITEM
5. INTERESTS OF NAMED EXPERTS AND COUNSEL
The
validity of the Common Stock offered hereby has been passed upon by the Company
by Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (“ELLK”), 805 Third Avenue,
New York, New York 10022, Sam Schwartz, a partner of ELLK, currently owns 23,584
shares of our Common Stock and options to purchase 12,500 shares of our Common
Stock.
Section
145 of the Delaware General Corporations Law (the “DGCL”) contains provisions
entitling the Company’s directors and officers to indemnification from
judgments, fines, amounts paid in settlement, and reasonable expenses (including
attorneys’ fees) as the result of an action or proceeding in which they may be
involved by reason of having been a director or officer of the Company. In
its
Certificate of Incorporation, the Company has included a provision that limits,
to the fullest extent now or hereafter permitted by the DGCL, the personal
liability of its directors to the Company or its stockholders for monetary
damages arising from a breach of their fiduciary duties as directors. Under
the
DGCL as currently in effect, this provision limits a director’s liability except
where such director (i) breaches his duty of loyalty to the Company or its
stockholders, (ii) fails to act in good faith or engages in intentional
misconduct or a knowing violation of law, (iii) authorizes payment of an
unlawful dividend or stock purchase or redemption as provided in Section 174
of
the DGCL, or (iv) obtains an improper personal benefit. This provision does
not
prevent the Company or its stockholders from seeking equitable remedies, such
as
injunctive relief or rescission. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have
any
effective remedy against actions taken by directors that constitute negligence
or gross negligence.
The
Certificate of Incorporation also includes provisions to the effect that
(subject to certain exceptions) the Company shall, to the maximum extent
permitted from time to time under the law of the State of Delaware, indemnify,
and upon request shall advance expenses to, any director or officer to the
extent that such indemnification and advancement of expenses is permitted under
such law, as it may from time to time be in effect. In addition, the Bylaws
require the Company to indemnify, to the full extent permitted by law, any
director, office, employee or agent of the Company for acts which such person
reasonably believes are not in violation of the Company’s corporate purposes as
set forth in the Certificate of Incorporation. At present, the DGCL provides
that, in order to be entitled to indemnification, an individual must have acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the Company’s best interests.
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to any charter, provision, by-law, contract, arrangement, statute or otherwise,
the Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
Not
applicable.
No. |
Description |
|
|
4.1
|
The
Company’s Amended and Restated 1996 Stock Option Plan. Previously
filed as an attachment to the Company’s Proxy Statement filed on October
6, 2000, and incorporated herein by reference.
|
|
|
4.2*
|
Form
of Stock Option Agreement.
|
|
|
5.1*
|
Opinion
of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. regarding legality of
securities being registered.
|
|
|
23.1*
|
Consent
of Radin Glass & Co., LLP independent registered public accounting
firm.
|
|
|
23.2*
|
Consent
of Eisner LLP, former independent registered public accounting
firm.
|
|
|
23.3*
|
Consent
of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (contained in
Exhibit 5.1).
|
|
|
24.1*
|
No
person has signed this Registration Statement under a power of
attorney. A
power of attorney relating to the signing of amendments hereto
is
incorporated in the signature page
hereof.
|
*
Filed
herewith
(1)
The
undersigned Registrant hereby undertakes:
(a)
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to:
(i) Include
any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) Reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement;
(iii) Include
any additional or changed material information on the plan of
distribution.
provided,
however, that the undertakings set forth in paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in reports filed
with
or furnished to the SEC by the Registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated by reference
in this Registration Statement.
(b)
For
determining liability under the Securities Act, treat each post-effective
amendment as a new Registration Statement of the securities offered, and the
offering of securities at that time to be the initial bona
fide
offering.
(c)
File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of this offering.
(2) The
undersigned Registrant hereby undertakes that, for purposes of determining
any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934(and, where applicable, each filing of an employee benefit plan’s
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona
fide
offering
thereof.
(2)
Insofar as indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers and controlling persons of the Registrant,
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and
is, therefore, unenforceable. In
the
event that a claim for indemnification against such liabilities (other than
the
payment by the Registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
Pursuant
to the requirements of the Securities Act of 1933, the Registrant certifies
that
it has reasonable grounds to believe that it meets all of the requirements
for
filing on Form S-8 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
New
York, State of New York.
Dated:
February 12, 2007
|
|
|
|
NETWORK-1
SECURITY SOLUTIONS, INC. |
|
|
|
|
By: |
/s/ Corey
M.
Horowitz |
|
Corey M. Horowitz |
|
Chairman
and Chief Executive Officer |
KNOW
ALL
MEN BY THESE PRESENTS, that each director and officer whose signature appears
below constitutes and appoints Corey M. Horowitz his true and lawful
attorney-in-fact and agent, with full power and substitution and
re-substitution, to sign in any and all capacities any and all amendments or
post-effective amendments to this Registration Statement on Form S-8 and to
file
the same with all exhibits thereto and other documents in connection therewith
with the Securities and Exchange Commission, granting to such attorney-in-fact
and agent, full power and authority to do all such other acts and execute all
such other documents as he may deem necessary or desirable in connection with
the foregoing, as fully as the undersigned might or could do in person, hereby
ratifying and confirming all that such attorney-in-fact and agent may lawfully
do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated:
Signature |
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/
Corey M.
Horowitz
|
|
Chairman
and Chief Executive Officer
|
|
February
12, 2007
|
Corey
M. Horowitz
|
|
(principal
executive officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
David C.
Kahn
|
|
Chief
Financial Officer
|
|
February
12, 2007
|
David
C. Kahn
|
|
(principal
financial and accounting officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Robert
Graifman
|
|
Director
|
|
February
12, 2007
|
Robert
Graifman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Robert
Pons
|
|
Director
|
|
February
12, 2007
|
Robert
Pons
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/
Laurent
Ohana
|
|
Director
|
|
February
12, 2007
|
Laurent
Ohana
|
|
|
|
|
|
4.1
|
The
Company’s Amended and Restated 1996 Stock Option Plan. Previously filed as
an attachment to the Company’s Proxy Statement filed on October 6, 2000,
and incorporated herein by
reference.
|
|
4.2*
|
Form
of Stock Option Agreement.
|
|
5.1*
|
Opinion
of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. regarding legality of
securities being registered.
|
|
23.1* |
Consent
of Radin Glass & Co., LLP independent certified public
accountants.
|
|
23.2*
|
Consent
of Eisner LLP, former independent registered accounting
firm.
|
|
23.3*
|
Consent
of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (contained in Exhibit
5.1).
|
|
24.1*
|
No
person has signed this Registration Statement under a power of attorney.
A
power of attorney relating to the signing of amendments hereto is
incorporated in the signature page
hereof.
|