As filed with the Securities and Exchange Commission on June 21, 2005
REGISTRATION NO. 333-______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
NETWORK-1 SECURITY SOLUTIONS, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 11-3027591
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
445 PARK AVENUE, SUITE 1028
NEW YORK, NEW YORK 10022
(212) 829-5700
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
--------------------
COREY M. HOROWITZ
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
445 PARK AVENUE, SUITE 1028
NEW YORK, NEW YORK 10022
(212) 829-5700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------------
COPIES TO:
SAM SCHWARTZ, ESQ.
EISEMAN LEVINE LEHRHAUPT & KAKOYIANNIS, P.C.
845 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 752-1000
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1993, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: |_| __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_| __________
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: |_|
================================================================================
--------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE PER SHARE OFFERING AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF REGISTERED(2) PRICE (3) PRICE (3) FEE
SECURITIES TO BE REGISTERED
---------------------------- -------------- ------------------ ------------------ ------------
Common Stock, par value
$.01 per share 16,836,267(1) $.73 $12,240,475 $1,446.59
--------------------------------------------------------------------------------------------------
(1) Includes the registration for resale of the following: (i) 2,685,000 shares
of common stock and 2,063,750 shares of common stock issuable upon exercise of
warrants issued in a private offering in December 2004 and January 2005, (ii)
8,471,679 shares of common stock, (iii) 1,352,152 shares of common stock
issuable upon exercise of warrants issued as part of a private offering in
December 1999 and (iv) 2,263,686 shares of common stock issuable upon exercise
of certain other outstanding warrants and options.
(2) Pursuant to Rule 416 promulgated under the Securities Act of 1933, as
amended, this Registration Statement includes an indeterminate number of
additional shares of common stock as from time to time become issuable upon the
exercise of certain warrants by reason of stock splits, stock dividends and
other similar transactions.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and based
on the average of the bid and asked prices of the common stock on the OTC
Bulletin Board on June 15, 2005 in accordance with Rule 457(c) under the
Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
NETWORK-1 SECURITY SOLUTIONS, INC.
16,836,267 SHARES OF COMMON STOCK
o The selling stockholders listed on pages 14 to 18 of this Prospectus are
offering and selling up to 16,836,267 shares of our common stock.
o We will not receive any proceeds from the sale of these shares of common
stock. We will receive proceeds if warrants and options to purchase common
stock are exercised by payment of cash and those proceeds will be used for
our general corporate purposes.
o Our common stock is traded on the OTC Bulletin Board under the symbol
"NSSI.OB".
o On June 15, 2005, the average of the bid and ask prices for our common
stock was $.73.
o This prospectus relates to the resale from time to time of:
o 2,685,000 shares of common stock and 2,063,750 shares of common stock
issuable upon exercise of warrants issued in our private offering in
December 2004 and January 2005;
o 8,471,679 shares of common stock owned by certain of our stockholders;
o 1,352,152 shares of common stock issuable upon the exercise of
outstanding warrants issued as part of our private offering in
December 1999; and
o 2,263,686 shares of common stock issuable upon exercise of certain
other warrants and options.
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 7 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 JUNE _____, 2005
TABLE OF CONTENTS
PAGE
PROSPECTUS SUMMARY..........................................................3
RISK FACTORS................................................................7
WHERE YOU CAN FIND MORE INFORMATION........................................12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................12
NOTE REGARDING FORWARD-LOOKING STATEMENTS..................................13
USE OF PROCEEDS............................................................13
SELLING STOCKHOLDERS.......................................................14
PLAN OF DISTRIBUTION.......................................................23
LEGAL MATTERS..............................................................25
EXPERTS....................................................................25
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES.................................................26
2
--------------------------------------------------------------------------------
PROSPECTUS SUMMARY
This summary represents a summary of all material terms of the offering and
only highlights the more detailed information that appears elsewhere, or is
incorporated by reference, in this prospectus. This prospectus may not contain
all the information important to you as an investor. Accordingly, you should
carefully read this entire prospectus together with all other information
incorporated by reference in this prospectus before deciding whether to invest
in our common stock, especially the risks of investing in our common stock
discussed under the caption "Risk Factors".
Unless the context otherwise requires, all references to "we," "us," "our,"
or the "Company" in this prospectus refer to Network-1 Security Solutions, Inc.,
a Delaware corporation.
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.
On November 18, 2003, we acquired a portfolio of telecommunications and
data networking patents (the "Patent Portfolio") from Merlot Communications,
Inc., a broadband communications solutions provider. The Patent Portfolio
consists of six patents issued by the U.S. Patent Office that relate to various
telecommunications and data networking technologies and includes, among other
things, patents covering (i) the control of power delivery over Ethernet
networks for the purpose of remotely powering network devices and (ii) systems
and methods for the transmission of audio, video and data over local area
networks (LANs) in order to achieve higher quality of service.
Our future success is largely dependent upon our proprietary technologies,
our ability to protect our intellectual property rights and enter into license
agreements for our technology. 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 be assured that our
patents will be upheld, or that third parties will not invalidate our patents.
In March 2004, PowerDsine Inc. commenced litigation against us seeking, among
other things, a declaratory judgment that our patent covering remote delivery of
power over Ethernet cables (U.S. Patent No. 6,218,930) is invalid (See "Risk
Factors - We face uncertainty as to the outcome of litigation with PowerDsine").
In February 2004, we initiated licensing efforts relating to our patent
(U.S. Patent No. 6,218,930) covering the control of power delivery over Ethernet
cables (the "Remote Power Patent"). The Remote Power Patent application was
filed on March 11, 1999 and the patent was granted by the U.S. Office of Patent
and Trademark on April 21, 2001. The Remote Power Patent expires on March 11,
2019. The Remote Power Patent relates to, among other things, several key
technologies underlying the IEEE 802.3af Power Over Ethernet ("PoE") standard
--------------------------------------------------------------------------------
3
--------------------------------------------------------------------------------
that was approved on June 13, 2003 by the Institute of Electrical and Electronic
Engineers ("IEEE"). This standard governs the delivery of power over Ethernet
cables in order to remotely power network connected devices, including wireless
switches, wireless access points, FRID card readers, VOIP telephones, enterprise
LAN switches and network cameras.
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 our direct efforts) worldwide
rights to negotiate license agreements for our Remote Power Patent with respect
to certain potential licensees agreed to between the parties. We or ThinkFire
may 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 its behalf.
As of May 31, 2005, we transmitted letters to approximately 85 companies
offering licenses to the Remote Power Patent. To date we have not entered into
any license agreements with third parties with respect to our Remote Power
Patent or any of our other patents.
MARKET OVERVIEW
We have determined that our initial licensing efforts will be focused on
our Remote Power Patent. Our Remote Power Patent relates to several technologies
that describe a methodology for controlling the delivery of power to certain
devices over an Ethernet network.
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, at the urging of several industry vendors, 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. On June
13, 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. The Standard provides for the Power Sourcing
Equipment (PSE) to be deployed in switches or as standalone midspan hubs to
provide power to remote devices such as 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.
--------------------------------------------------------------------------------
4
--------------------------------------------------------------------------------
Ethernet is the leading local area networking technology in use today. PoE
technology allows for the delivery of power over Ethernet cables rather than by
separate power cords. As a result, a variety of network devices, including IP
telephones, wireless LAN Access Points, web-based network security cameras, data
collection terminals and other network devices, will be able to receive power
over existing data cables without the need to modify the existing infrastructure
to facilitate the provision of power for such devices through traditional AC
outlets. Advantages such as lower installation costs, remote management
capabilities, lower maintenance costs, centralized power backup, and flexibility
of device location as well as the advent of worldwide power compatibility create
the possibility of PoE becoming widely adopted in networks throughout the world.
PoE provides numerous benefits including quantifiable returns on
investment. The cost of hiring electricians to pull power cable to remote
locations used for access points or security cameras can rival or exceed the
cost of the devices. Another key benefit is the need for Voice over IP power
reliability in the face of power failures. Using PoE enables data center UPS
systems to ensure on-going power - a function that would be difficult and
expensive to implement if each phone required AC outlets.
These and other advantages such as remote management capabilities, lower
maintenance costs, and flexibility of device location have led to forecasts that
PoE will be widely adopted in networks throughout the world. International Data
Corporation (IDC) forecasts that annual PoE sales will reach 134 million PSE
switch ports (not including midspan ports) by 2008, which equates to a 5 year
compound annual growth rate of 63%. A recent Gartner report estimates that PoE
port shipments more than tripled in 2004 and that price premiums for such ports
ranged from $45 to $65 per port and that 18% of all wiring closet switch ports
shipped in 2004 were PoE-enabled.
The VOIP market is currently one of the fastest growing segments in the
telecommunications industry. VOIP traffic has steadily increased over the last
several years and is being deployed by service providers and carriers worldwide.
IDC, a market research firm, estimates that worldwide IP telephone unit sales
are set to grow from 1.5 million units in 2003 to nearly 5 million units in 2007
and overall voice-over IP equipment, which in 2003 represented a market of $3.3
billion, is expected to grow at a compound annual growth rate of 45.0% to $15.1
billion by 2007.
The ability to supply power to end-devices through Ethernet cables can be
applied to other end-devices, such as advanced security cameras, RFID card
readers, laptop computers, personal digital assistants and portable digital
music players. As the desire to connect more end-devices to the Ethernet network
grows, we believe that PoE technology will become more widely used as a method
to power these end-devices.
--------------------------------------------------------------------------------
5
--------------------------------------------------------------------------------
We also own five (5) additional patents covering various methodologies that
provide for allocating bandwidth and establishing Quality of Service for delay
sensitive data, such as voice, on packet data networks. Quality of Service
issues become important when data networks carry packets that contain audio and
video which may require priority over data packets traveling over the same
network. Covered within these patents are also technologies that establish bi-
directional communications control channels between network-connected devices in
order to support advanced applications on traditional data networks. We believe
that potential licensees of the technologies contained in these patents would be
vendors deploying applications that require the low latency transport of delay
sensitive data such as video over data networks.
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.
SHARES BEING OFFERED
This prospectus relates to the offering by the selling shareholders of an
aggregate of 16,836,267 shares of our common stock, consisting of (i) 2,685,000
shares of our common stock and 2,063,750 shares of our common stock issuable
upon exercise of warrants issued in our private offering in December 2004 and
January 2005, (ii) 8,471,679 shares of common stock owned by certain of our
stockholders, (iii) 1,352,152 shares of our common stock issuable upon exercise
of warrants issued to such selling stockholders as part of our private offering
in December 1999 and (iv) 2,263,686 shares of our common stock issuable upon
exercise of certain other outstanding warrants and options.
--------------------------------------------------------------------------------
6
RISK FACTORS
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 13.
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 $(43,720,000) as of March 31, 2005.
For the years ended December 31, 2004 and 2003, we incurred net losses of
$(1,953,000) and $(614,000), respectively. For the three months ended March 31,
2005, we incurred a net loss of $(731,000). We have financed our operations
primarily by sales of equity securities as well as the sale of our CyberWall
PLUS security software technology in May 2003. Since December 2002, when we
discontinued our security software products and following the commencement of
our new technology licensing business in November 2003, we have not had material
revenue from operations and for the year ended December 31, 2004 and the three
months ended March 31, 2005, we had no revenue from operations. Our ability to
achieve revenue and generate positive cash flow from operations is dependent
upon consummating licensing agreements with respect to our patented technology.
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 new 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 current cash position will
more likely than not be sufficient to satisfy our operations and capital
requirements until September 2006. 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 September
2006. 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.
7
OUR NEW 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 very 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 new 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 the Remote Power Patent
with respect to certain potential licensees agreed 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 or even if it does,
such license agreements 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
8
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 our company.
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 the future, it may be necessary for us to commence patent litigation
against third parties whom we believe require a license to our patents. In
addition, we may be subject to third-party claims seeking to invalidate our
patents, as is the case with the action commenced by PowerDsine relating to our
Remote Power Patent as discussed below. These types of claims may subject us to
costly litigation. In addition, based on our limited financial resources, we may
not be able to pursue litigation as aggressively as others with substantially
greater financial resources. Based on our limited financial resources, it may be
necessary for us to engage third party professionals on a contingency basis
pursuant to which such parties would be entitled to share in the proceeds of any
successful enforcement of our intellectual property rights. If third parties
making claims against us seeking to invalidate our patent 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 our company.
WE FACE UNCERTAINTY AS TO THE OUTCOME OF LITIGATION WITH POWERDSINE.
On March 31, 2004, PowerDsine Inc. ("PowerDsine") commenced an action
against us in the United District Court, Southern District of New York (Civil
Action No. 04 CV 2502) seeking a declaratory judgment that our Remote Power
Patent is invalid and is not infringed by PowerDsine and/or its customers.
PowerDsine further seeks an order permanently enjoining us (i) from making any
claims to any person or entity that PowerDsine's products infringe the Remote
Power Patent or contribute to infringement of the patent, (ii) from interfering
with or threatening to interfere with the importation, sale, license or use of
PowerDsine's PoE components or products, and (iii) from instituting or
prosecuting any lawsuit or proceeding placing at issue the right of PowerDsine,
its customers, licensees, successors, or assigns to import, use or sell
PowerDsine's PoE components or products. We believe our Remote Power Patent is
valid and that we have meritorious defenses to the action. On December 1, 2004,
we moved to dismiss the declaratory judgment action asserting, among other
things, that there is no actual case or controversy because PowerDsine did not
have reasonable apprehension of suit at the time the case was filed, and
therefore, the court lacks jurisdiction over the matter. On January 21, 2005 our
motion to dismiss was denied. We have engaged in settlement discussions with
PowerDsine in an effort to resolve the litigation. In the event that we are
unable to settle the litigation, we intend to vigorously defend the lawsuit and
take whatever actions are necessary to protect our intellectual property. In the
event, however, that the Court granted the declaratory
9
judgment sought by PowerDsine and our Remote Power Patent was determined to be
invalid, such a determination would have a material adverse effect on us.
Regardless of the outcome, this litigation may subject us to significant costs
and diversion of management time.
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, at the urging of several industry vendors, 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.
10
DEPENDENCE UPON CEO AND CHAIRMAN.
Our success will largely be dependent upon the personal efforts of Corey M.
Horowitz, Chairman and Chief Executive Officer and Chairman of the Board of
Directors. On November 26, 2004, we entered into a two (2) year employment
agreement with Mr. Horowitz pursuant to which he serves as our Chairman and
Chief Executive Officer. We do not maintain key man life insurance on the life
of Mr. Horowitz. The loss of the services of Mr. Horowitz would have a material
adverse effect on our business and prospects.
RISKS RELATED TO LOW PRICED STOCKS.
Our common stock currently trades on the OTC Bulletin Board under the
symbol NSSI.OB. 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 May 31, 2005, there are outstanding (i) options and warrants to
purchase an aggregate of 11,017,244 shares of our common stock at exercise
prices ranging from $.12 to $10.13, and (ii) 207,630 additional shares of our
common stock which may be issued in the future under our stock option plan. 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
11
Delaware law may restrict the ability of our stockholders to authorize a merger,
business combination or change of control.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The SEC has prescribed rates for copying. You may obtain 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 you on the SEC's Internet site at
http://www.sec.gov.
This prospectus is part of a Registration Statement on Form S-3 filed by us
with the SEC under the Securities Act and therefore omits certain information in
the 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.
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 part of this prospectus, and information that we file later
with the SEC will automatically update and supersede 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:
1. our Annual Report on Form 10-KSB for the year ended December 31, 2004
(filed April 14, 2005);
2. our Quarterly Report on Form 10-QSB for the three months ended March
31, 2005 (filed May 16, 2005);
3. our Quarterly Report on Form 10-QSB/A for the three months ended March
31 2005 (filed June 14, 2005);
4. our Current Report on Form 8-K/A (filed January 24, 2005);
5. our Current Report on Form 8-K (filed January 20, 2005); and
6. 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.
12
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
including any and all information that has been incorporated by reference in
this Prospectus. You should direct such requests to us at 445 Park Avenue, Suite
1028, New York, New York 10022, attention: Corey M. Horowitz, Chairman and Chief
Executive Officer, telephone number (212) 829-5700.
You should rely only on the information and representations provided in
this prospectus or on the information incorporated by reference in this
prospectus. Neither we nor the selling stockholders have authorized anyone to
provide you with different information. Neither we nor the selling stockholders
are making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of this document.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. Forward-looking statements 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.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares of our common
stock by the selling stockholders. All proceeds from the sale of such shares
will be for the accounts of the selling stockholders. We will receive
approximately $8,079,119 in proceeds, equal to the aggregate exercise price of
all warrants and options to purchase an aggregate of 5,679,588 shares of our
common stock, if the holders of all of the warrants and options referenced in
this prospectus exercise such securities into shares of our common stock for
cash. Warrants to purchase 550,000
13
shares of our common stock at an aggregate exercise price of $580,000 may be
exercised on a cashless basis (by payment of the exercise price in shares rather
than a cash payment). Any cash proceeds that we may receive upon exercise of the
warrants and options will be used for working capital purposes.
SELLING STOCKHOLDERS
The following table sets forth information, as of June 15, 2005, with
respect to the common stock beneficially owned by each selling stockholder. The
selling stockholders are not obligated to sell any of the shares offered by this
prospectus. The number of shares sold by each selling stockholder may depend on
a number of factors, such as the market price of our common stock.
We are registering 16,836,267 shares of our common stock for resale by the
selling stockholders. We agreed to file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") with the Securities
and Exchange Commission, of which this prospectus is a part, with respect to the
resale of:
o 2,685,000 shares of our common stock and 2,063,750 shares of our
common stock issuable upon exercise of warrants issued in our private
offering completed in December 2004 and January 2005;
o 8,471,679 additional shares of our common stock issued to certain of
our stockholders, and
o 1,352,152 shares of our common stock issuable upon the exercise of
warrants issued as part of our private offering completed in December
1999; and
o 2,263,686 shares of our common stock issuable upon exercise of certain
other outstanding warrants and options, all as disclosed in the table
below.
The number of shares of our common stock shown in the following table as
being offered by the selling stockholders do not include such presently
indeterminate number of additional shares of our common stock that may be
issuable as a result of stock splits, stock dividends and similar transactions.
Pursuant to Rule 416 under the Securities Act, however, such shares are included
in the Registration Statement of which this prospectus is a part.
The selling stockholders may sell any or all of their shares listed below
from time to time. Accordingly, we cannot estimate how many shares the selling
stockholders will own upon consummation of any such sales. Also, the selling
stockholders may have sold, transferred or otherwise disposed of all or a
portion of their shares since the date on which the information was provided in
transactions exempt from the registration requirements of the Securities Act.
14
None of the selling stockholders has had a material relationship with us
within the past three years other than as a result of the ownership of our
securities except: (i) Corey M. Horowitz is our Chairman and Chief Executive
Officer and (ii) CHM Capital Management Corp., the sole shareholder, director
and officer of which is Mr. Horowitz, performed consulting services for us prior
to Mr. Horowitz becoming our Chairman and Chief Executive Officer in December
2003.
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED SHARES BEING BENEFICIALLY OWNED OUTSTANDING COMMON STOCK
NAME PRIOR TO OFFERING(1) OFFERED AFTER OFFERING(1)(2) AFTER OFFERING(1)
----- -------------------- ------- -------------------- -----------------
Barry Rubenstein 3,792,915 (3) 3,745,415 47,500 *
Irwin Lieber 2,098,002 (4) 2,050,502 47,500 *
Barry Fingerhut 2,008,598 (5) 2,008,598 0 0%
Seth Lieber 1,632,300 (6) 1,632,300 0 0%
Jonathan Lieber 1,630,748 (7) 1,630,748 0 0%
Wheatley Partners II, L.P. 1,280,207 (8) 1,280,207 0 0%
Wheatley Partners, L.P. 194,280 194,280 0 0%
Wheatley Foreign Partners, L.P. 16,868 16,868 0 0%
Woodland Venture Fund 829,226 829,226 0 0%
Seneca Ventures 619,983 619,983 0 0%
Woodland Partners 309,316 309,316 0 0%
Brookwood Partners, L.P. 294,810 294,810 0 0%
Marilyn Rubenstein 1,049 1,049 0 0%
Corey M. Horowitz 8,591,945 (9) 4,854,084 3,737,861 17.4%
CMH Capital Management Corp. 4,167,800 (10) 4,167,800 0 0%
Donna Slavitt 78,720 78,720 0 0%
Logan Zev Horowitz 1999 Trust 15,000 15,000 0 0%
Dylan Max Horowitz 1989 Trust 15,000 15,000 0 0%
Corey M. Horowitz Custodian for
Zachary Jordon Horowitz 15,000 15,000 0 0%
FalconStor Software, Inc. 650,000 (11) 650,000 0 0%
Emigrant Capital Corporation 1,312,500 (12) 1,312,500 0 0%
15
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED SHARES BEING BENEFICIALLY OWNED OUTSTANDING COMMON STOCK
NAME PRIOR TO OFFERING(1) OFFERED AFTER OFFERING(1)(2) AFTER OFFERING(1)
----- -------------------- ------- -------------------- -----------------
Singer Opportunity Fund, L.P. 784,125 (13) 625,625 158,500 *
Singer Fund, L.P. 282,355 (14) 249,375 32,980 *
David M. Seldin 474,000 (15) 455,000 19,000 *
Robert Graifman 279,777 (16) 175,000 104,777 *
Gilbert S. Stein 175,000 (17) 175,000 0 0%
John R. Hart 175,000 (18) 175,000 0 0%
Granite Bridge Fund, L.P. 131,250 (19) 131,250 0 0%
CGA Resources, LLC 87,500 (20) 87,500 0 0%
Barry S. Friedberg 87,500 (21) 87,500 0 0%
Dasa Sada, LLC 87,500 (22) 87,500 0 0%
Steven Ackerman 87,500 (23) 87,500 0 0%
Francis May 43,750 (24) 43,750 0 0%
Matthew Balk 17,500 (25) 17,500 0 0%
Kenneth L. Walters 17,500 (26) 17,500 0 0%
Jeb Investment Ltd. 175,450 (27) 166,250 9,200 *
Jeb Partners, L.P. 175,050 (28) 166,250 8,800 *
Manchester Explorer Limited Partnership 115,200 (29) 105,000 10,200 *
Steve Heinman 175,000 (30) 175,000 0 0%
Brian Eng 112,500 (31) 87,500 25,000 *
Brad Reifler 13,125 (32) 13,125 0 0%
Steven Goldfarb 8,750 (33) 8,750 0 0%
Hilary Bergman 13,125 (34) 13,125 0 0%
Samuel Solomon 17,500 (35) 17,500 0 0%
Jeffrey Finkle 105,000 (36) 105,000 0 0%
Edward Sussi 35,000 (37) 35,000 0 0%
16
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED SHARES BEING BENEFICIALLY OWNED OUTSTANDING COMMON STOCK
NAME PRIOR TO OFFERING(1) OFFERED AFTER OFFERING(1)(2) AFTER OFFERING(1)
----- -------------------- ------- -------------------- -----------------
Alan Friedman 35,000 (38) 35,000 0 0%
Alan Weiner 43,750 (39) 43,750 0 0%
Laurent Ohana 50,000 (40) 50,000 0 0%
Philip Bloom 586,526 (41) 586,526 0 0%
New Dimensions Trading, LTD 114,554 (42) 114,554 0 0%
Eli Oxenhorn 95,073 (43) 95,073 0 0%
Aaron Wolfson 76,472 (44) 76,472 0 0%
Avi Fogel 44,857 (45) 44,857 0 0%
Jack Erlanger 44,855 (46) 44,855 0 0%
Abraham Wolfson 38,186 (47) 38,186 0 0%
William Walters 38,186 (48) 38,186 0 0%
Gerald Josephson 36,355 (49) 36,355 0 0%
MW Partnership 34,066 (50) 34,066 0 0%
Gyenes and Co. 31,139 (51) 22,707 8,432 *
Jeffrey Rubinstein 29,518 (52) 29,518 0 0%
Sandler Company Investment Partners 24,665 (53) 24,665 0 0%
Maurice Shamah 22,707 (54) 22,707 0 0%
Larry Altman 22,707 (55) 22,707 0 0%
G.E.R. Family Partnership 16,862 (56) 16,862 0 0%
Patrick McBrien 12,267 (57) 12,267 0 0%
Scott Zelnick 12,267 (58) 12,267 0 0%
Levitan Family Charitable Trust 12,154 (59) 12,153 0 0%
Abbey Oxenhorn 11,351 (60) 11,351 0 0%
Seth Oxenhorn 11,351 (61) 11,351 0 0%
Emanuel Pearlman 8,677 (62) 4,098 4,579 *
17
NUMBER OF SHARES NUMBER OF NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED SHARES BEING BENEFICIALLY OWNED OUTSTANDING COMMON STOCK
NAME PRIOR TO OFFERING(1) OFFERED AFTER OFFERING(1)(2) AFTER OFFERING(1)
----- -------------------- ------- -------------------- -----------------
Brad Zelnick 4,812 (63) 4,812 0 0%
Sage Alliances Inc. 135,462 (64) 135,462 0 0%
Jim McNeil 37,248 (65) 37,248 0 0%
Sam Schwartz 38,412 (66) 2,328 36,084 *
Roy Martin 2,328 (67) 2,328 0 0%
Malcolm Taub 2,328 (68) 2,328 0 0%
------------------
* Less than 1%
(1) Except as otherwise indicated, the address for each beneficial owner
is c/o Network-1 Security Solutions, Inc., 445 Park Avenue, Suite
1028, New York, New York 10022.
(2) 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. Assumes
a base of 17,697,572 shares of common stock outstanding.
(3) 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, (vi)
49,664 shares of common stock subject to currently exercisable
warrants held by Mr. Rubenstein, (vii) 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
18
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.
(4) 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, (v) 47,500 shares of common stock subject to
currently exercisable stock options owned by Mr. Lieber, and (vi)
49,664 shares of common stock subject to currently exercisable
warrants 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.
(5) 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., and (iv) 517,243 shares of common
stock owned by Mr. Fingerhut. Mr. Fingerhut 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 Fingerhut is c/o Wheatley Partners, II, L.P., 80 Cuttermill
Road, Great Neck, New York 11021.
(6) 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., and (iv)140,945 shares of common
stock owned by Mr. Lieber. 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 Seth Lieber
is c/o Wheatley Partners, II, L.P., 80 Cuttermill Road, Great Neck,
New York 11021.
19
(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., and (iv)139,393 shares of common
stock owned by Mr. Lieber. 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 Jonathan
Lieber is c/o Wheatley Partners, II, L.P., 80 Cuttermill Road, Great
Neck, New York 11021.
(8) Includes 1,280,207 shares of common stock. Wheatley Partners II,
L.P.'s business address is 80 Cuttermill Road, Great Neck, New York
11021.
(9) Includes (i) 475,053 shares of common stock held by Mr. Horowitz, (ii)
3,737,861 shares of common stock subject to currently exercisable
stock options held by Mr. Horowitz, (iii) 2,867,800 shares of common
stock held by CMH Capital Management Corp. ("CMH"), (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) 85,220 shares of common stock
subject to currently exercisable warrants held by Mr. Horowitz, (vii)
78,720 shares of common stock owned by Donna Slavitt, the wife of Mr.
Horowitz (viii) 45,000 shares of common stock held by two trusts and a
custodian account for the benefit of Mr. Horowitz's three children and
(ix) 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 610,625 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.
(10) Includes (i) 2,867,800 shares of common stock, (ii) 550,000 shares of
common stock subject to currently exercisable warrants and (iii)
750,000 shares of common stock subject to currently exercisable
options.
(11) Includes 650,000 shares of common stock subject to currently
exercisable warrants. The address of FalconStor Software, Inc. is 2
Huntington Quadrangle, Suite 2500, Melville, New York 11747.
(12) Includes (i) 750,000 shares of common stock and (ii) 562,500 shares of
common stock subject to currently exercisable warrants. The address of
Emigrant Capital Corporation is 6 East 43rd Street, New York, New York
10017.
(13) Includes (i) 516,000 shares of Common Stock and (ii) 268,125 shares of
Common Stock subject to currently exercisable warrants owned by Singer
Opportunity Fund, L.P. The address of Singer Opportunity Fund, L.P. is
650 Fifth Avenue, New York, New York 10019.
(14) Includes (i) 175,480 shares of Common Stock and (ii) 106,875 shares of
Common Stock subject to currently exercisable warrants owned by Singer
Fund, L.P., The address of Singer Fund, L.P. is 650 Fifth Avenue, New
York, New York 10019.
(15) Includes (i) 279,000 shares of common stock and (ii) 195,000 shares of
common stock subject to currently exercisable warrants.
20
(16) Includes (i) 154,777 shares of common stock and (ii) 75,000 shares of
common stock subject to currently exercisable warrants and (iii)
50,000 shares subject to currently exercisable stock options.
(17) Includes (i) 100,000 shares of common stock and (ii) 75,000 shares of
common stock subject to currently exercisable warrants.
(18) Includes (i) 100,000 shares of common stock and (ii) 75,000 shares of
common stock subject to currently exercisable warrants.
(19) Includes (i) 75,000 shares of common stock and (ii) 56,250 shares of
common stock subject to currently exercisable warrants.
(20) Includes (i) 50,000 shares of common stock and (ii) 37,500 shares of
common stock subject to currently exercisable warrants.
(21) Includes (i) 50,000 shares of common stock and (ii) 37,500 shares of
common stock subject to currently exercisable warrants.
(22) Includes (i) 50,000 shares of common stock and (ii) 37,500 shares of
common stock subject to currently exercisable warrants.
(23) Includes (i) 50,000 shares of common stock and (ii) 37,500 shares of
common stock subject to currently exercisable warrants.
(24) Includes (i) 25,000 shares of common stock and (ii) 18,750 shares of
common stock subject to currently exercisable warrants.
(25) Includes (i) 10,000 shares of common stock and (ii) 7,500 shares of
common stock subject to currently exercisable warrants.
(26) Includes (i) 10,000 shares of common stock and (ii) 7,500 shares of
common stock subject to currently exercisable warrants.
(27) Includes (i) 104,200 shares of common stock and (ii) 71,250 shares of
common stock subject to currently exercisable warrants.
(28) Includes (i) 103,800 shares of common stock and (ii) 71,250 shares of
common stock subject to currently exercisable warrants.
(29) Includes (i) 70,200 shares of common stock and (ii) 45,000 shares of
common stock subject to currently exercisable warrants.
(30) Includes (i) 100,000 shares of common stock and (ii) 75,000 shares of
common stock subject to currently exercisable warrants.
(31) Includes (i) 75,000 shares of common stock and (ii) 37,500 shares of
common stock subject to currently exercisable warrants.
21
(32) Includes (i) 7,500 shares of common stock and (ii) 5,625 shares of
common stock subject to currently exercisable warrants.
(33) Includes (i) 5,000 shares of common stock and (ii) 3,750 shares of
common stock subject to currently exercisable warrants.
(34) Includes (i) 7,500 shares of common stock and (ii) 5,625 shares of
common stock subject to currently exercisable warrants.
(35) Includes (i) 10,000 shares of common stock and (ii) 7,500 shares of
common stock subject to currently exercisable warrants.
(36) Includes (i) 60,000 shares of common stock and (ii) 45,000 shares of
common stock subject to currently exercisable warrants.
(37) Includes (i) 20,000 shares of common stock and (ii) 15,000 shares of
common stock subject to currently exercisable warrants.
(38) Includes (i) 20,000 shares of common stock and (ii) 15,000 shares of
common stock subject to currently exercisable warrants.
(39) Includes (i) 25,000 shares of common stock and (ii) 18,750 shares of
common stock subject to currently exercisable warrants.
(40) Includes 50,000 shares of common stock subject to currently
exercisable warrants.
(41) Includes 586,526 shares of common stock subject to currently
exercisable warrants.
(42) Includes 114,554 shares of common stock subject to currently
exercisable warrants.
(43) Includes 95,073 shares of common stock subject to currently
exercisable warrants.
(44) Includes 76,472 shares of common stock subject to currently
exercisable warrants.
(45) Includes 44,857 shares of common stock subject to currently
exercisable warrants.
(46) Includes 44,855 shares of common stock subject to currently
exercisable warrants.
(47) Includes 38,186 shares of common stock subject to currently
exercisable warrants.
(48) Includes 38,186 shares of common stock subject to currently
exercisable warrants.
(49) Includes 36,355 shares of common stock subject to currently
exercisable warrants.
(50) Includes 34,066 shares of common stock subject to currently
exercisable warrants.
(51) Includes (i) 8,432 shares of common stock and (ii) 22,707 shares of
common stock subject to currently exercisable warrants.
(52) Includes 29,518 shares of common stock subject to currently
exercisable warrants.
22
(53) Includes 24,665 shares of common stock subject to currently
exercisable warrants.
(54) Includes 22,707 shares of common stock subject to currently
exercisable warrants.
(55) Includes 22,707 shares of common stock subject to currently
exercisable warrants.
(56) Includes 16,862 shares of common stock subject to currently
exercisable warrants.
(57) Includes 12,267 shares of common stock subject to currently
exercisable warrants.
(58) Includes 12,267 shares of common stock subject to currently
exercisable warrants.
(59) Includes 12,154 shares of common stock subject to currently
exercisable warrants.
(60) Includes 11,351 shares of common stock subject to currently
exercisable warrants.
(61) Includes 11,351 shares of common stock subject to currently
exercisable warrants.
(62) Includes (i) 4,579 shares of common stock and (ii) 4,098 shares of
common stock subject to currently exercisable warrants.
(63) Includes 4,812 shares of common stock subject to currently exercisable
warrants.
(64) Includes 135,462 shares of common stock subject to currently
exercisable warrants.
(65) Includes 37,248 shares of common stock subject to currently
exercisable warrants.
(66) Includes (i) 23,584 shares of common stock and (ii) 14,828 shares
subject to currently exercisable options and warrants.
(67) Includes 2,328 shares of common stock subject to currently exercisable
warrants.
(68) Includes 2,328 shares of common stock subject to currently exercisable
warrants.
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.
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:
o ordinary brokerage transactions in which the broker-dealer solicits
purchasers;
23
o 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;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o broker-dealers may agree with the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The selling stockholders may offer their shares of common stock at any of
the following prices:
o fixed prices that may be changed;
o market prices prevailing at the time of sale;
o prices related to such prevailing market prices; and
o at negotiated prices.
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.
24
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.
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 securities offered hereby will be passed upon for us by
the law firm of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C., 845 Third Avenue,
New York, New York. Sam Schwartz, a member of such firm, owns 23,584 shares of
our common stock and owns warrants and options to purchase 14,828 shares of our
common stock as of the date of this prospectus.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-KSB for the year ended December 31, 2004 have been
so incorporated in reliance on the report of Eisner LLP, independent registered
public accounting firm, given on the authority of said firm as experts in
accounting and auditing.
25
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.
26
NETWORK-1 SECURITY SOLUTIONS, INC.
16,836,267 SHARES
OF
COMMON STOCK
------------------
PROSPECTUS
-----------------
JUNE __, 2005
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in the Registration Statement, all of which will be borne by the
Company.
SEC registration fee...................................... $ 1,446.59
Legal fees and expenses*.................................. $15,000.00
Accounting fees and expenses*............................. $ 2,500.00
Miscellaneous expenses*................................... $ 1,000.00
----------
TOTAL................................... $19,946.59
==========
* Estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
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
II-1
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.
ITEM 16. EXHIBITS
NO. DESCRIPTION
4.1 Form of Warrant, dated December 21, 2004, issued to certain investors
pursuant to the Securities Purchase Agreement, dated December 21,
2004, between the Company and the investors listed therein. Previously
filed as an exhibit to Exhibit 10.1 to the Current Report on Form 8-K
filed on December 28, 2004.
4.2 Form of Warrant, dated January 13, 2005, issued to certain investors
pursuant to the Securities Purchase Agreement, dated January 13, 2005,
between the Company the investors listed therein. Previously filed as
an exhibit to Exhibit 10.2 to the Current Report on Form 8-K filed
January 20, 2005, and incorporated herein by reference.
4.3 Form of Warrant, dated December 22, 1999, issued by the Company to the
holder listed thereon. Previously filed as Exhibit B to Exhibit 10.28
to the Form 8-K filed January 4, 2000, and incorporated herein by
reference.
4.4 Form of Warrant issued by the Company for services rendered.
Previously filed as Exhibit 4.3 to the Form S-3 Registration Statement
(Registration No. 333-96189) declared effective by the SEC on March
21, 2000.
5.1 Opinion of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. regarding
legality of securities being registered.
23.1 Consent of Eisner LLP, independent registered public accounting firm.
23.2 Consent of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (included
within 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.
II-2
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes that it will:
(a) File, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
additional or changed material information on the plan of distribution.
(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.
II-3
SIGNATURES
----------
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-3 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: June 21, 2005
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-3 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 June 21, 2005
--------------------------- Officer (principal executive
Corey M. Horowitz officer)
/s/ David C. Kahn Chief Financial Officer June 21, 2005
--------------------------- (principal financial and
David C. Kahn accounting officer)
/s/ Robert Graifman Director June 21, 2005
---------------------------
Robert Graifman
/s/ Robert Pons Director June 21, 2005
---------------------------
Robert Pons
II-4
INDEX TO EXHIBITS
NO. DESCRIPTION
--- -----------
4.1 Form of Warrant, dated December 21, 2004, issued to certain investors
pursuant to the Securities Purchase Agreement, dated December 21,
2004, between the Company and the investors listed therein. Previously
filed as an exhibit to Exhibit 10.1 to the Current Report on Form 8-K
filed on December 28, 2004.
4.2 Form of Warrant, dated January 13, 2005, issued to certain investors
pursuant to the Securities Purchase Agreement, dated January 13, 2005,
between the Company the investors listed therein. Previously filed as
an exhibit to Exhibit 10.2 to the Current Report on Form 8-K filed
January 20, 2005, and incorporated herein by reference.
4.3 Form of Warrant, dated December 22, 1999, issued by the Company to the
holder listed thereon. Previously filed as Exhibit B to Exhibit 10.28
to the Form 8-K filed January 4, 2000, and incorporated herein by
reference.
4.4 Form of Warrant issued by the Company for services rendered.
Previously filed as Exhibit 4.3 to the Form S-3 Registration Statement
(Registration No. 333-96189) declared effective by the SEC on March
21, 2000.
5.1 Opinion of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. regarding
legality of securities being registered.
23.1 Consent of Eisner LLP, independent registered public accounting firm.
23.2 Consent of Eiseman Levine Lehrhaupt & Kakoyiannis, P.C. (included
within 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.
II-5