Neonode Stock

Neonode Inc. (Neonode) provides advanced optical sensing solutions for contactless touch, touch, and gesture sensing.

The company also provides software solutions for machine perception that feature advanced machine learning algorithms to detect and track persons and objects in video streams from cameras and other types of imagers. The company bases its contactless touch, touch, and gesture sensing products and solutions using the company’s zForce technology platform and the company’s machine perception solutions on its MultiSensing technology platform. zForce (zero force) is the name for the company’s patented optical sensing technology built on infrared light, invisible to the human eye.

The company’s MultiSensing platform was designed to provide advanced, safe and traceable software applications to provide situational context. The company markets and sells its solutions to customers in many different markets and segments, including but not limited to, office equipment, automotive, industrial automation, medical, military and avionics.

In 2010, the company began licensing to original equipment manufacturers (‘OEMs’) and Tier 1 suppliers who embed the company’s technology into products they develop, manufacture, and sell. Since 2010, the company’s licensing customers have sold approximately 90 million devices that use the company’s technology. In October 2017, the company augmented its licensing business and began manufacturing and shipping touch sensor modules (‘TSMs’) that incorporate the company’s patented technology. The company sells these TSMs to OEMs, Original Design Manufacturers (‘ODMs’), and systems integrators for use in their products.

As of December 31, 2022, the company had 10 agreements with value added resellers (‘VARs’) for integration of the company’s TSMs in the products they offer to global OEMs, ODMs and systems integrators. In addition to this, the company distributes its TSMs through Digi-Key Corporation, Serial Microelectronics HK Ltd, and Nexty Electronics Corporation.

During 2022, the company continued to focus its efforts on maintaining its licensing customers and achieving design wins for new products both with current and future customers. The company made investments enhancing the design and improving the production yield of the company’s TSMs and improving the related firmware and configuration tools software platforms. The company also made investments to expand the company’s partner networks for sales and distribution of TSMs. The company intends to continue expanding the company’s TSM product offerings in 2023 and beyond, including new TSM variants and new sensor products for delivery to the company’s key markets.

License Fees

The company licenses its zForce technology to OEMs and Tier 1 suppliers who embed the company’s technology into products they develop, manufacture and sell. Since 2010, the company’s licensing customers have sold approximately 90 million devices that use the company’s patented technology.

As of December 31, 2022, the company had 35 valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers.

The company’s licensing customer base is primarily in the automotive and printer segments. Eleven of the company’s licensing customers are shipping products that embed the company’s technology. The company also expects to expand its customer base with a number of new customers who will be looking to ship new products incorporating the company’s zForce and MultiSensing technologies as they complete final product development and release cycles.

Product Sales

In addition to the company’s technical solutions business, the company designs and manufactures TSMs that incorporate the company’s patented technology. The company sells its TSMs to OEMs, ODMs and systems integrators for use in their products. The company also sells its Neonode branded AirBar product that incorporates one of the company’s TSMs through distributors.

The company utilizes a robotic manufacturing process designed specifically for the company’s components. The company’s TSMs are commercial-off-the-shelf products based on the company’s patent-protected zForce technology platform and can support the development of contactless touch, touch, gesture and object sensing solutions that, paired with the company’s technology licensing offering, give the company a full range of options to enter and compete in key markets.

In October 2017, the company began selling its TSMs to customers in the industrial and consumer electronics segments. Over time, the company expects a significant portion of its revenues will be derived from TSM sales.

Non-recurring Engineering Services

The company also offers NRE services related to application development linked to the company’s TSMs and its zForce and MultiSensing technology platforms on a flat rate or hourly rate basis.

Typically, the company’s licensing customers require engineering support during the development and initial manufacturing phase for their products using the company’s technology, while the company’s TSM customers require hardware or software modifications to the company’s standard products or support during the development and initial manufacturing phases of their products using the company’s technology. In both cases, the company can offer NRE services and earn NRE revenues.

Strategy and Focus Areas

The company’s customers use contactless touch, touch, gesture sensing, and computer vision technologies to grow their businesses, drive efficiencies, and seek competitive advantages. The company’s strategy is to deliver value-adding human-machine interaction (‘HMI’) and machine perception solutions and products that enable the company’s customers to achieve these targets. The company offers specialized NRE services related to the integration of the company’s solutions and products into customer systems and products to ensure that optimal functionality and performance is achieved.

Markets

Automotive

The Automotive value chain consists of OEMs (vehicle manufacturers) and tiered suppliers (Tier 1 system suppliers, Tier 2 component suppliers, etc.). In this market, the company mainly acts as a Tier 2 technology provider to Tier 1 suppliers who license the company’s technology and deliver different types of systems to OEMs (e.g. infotainment system displays featuring the company’s touch technology). In some cases, the company is also engaged directly by OEMs, following the trend that OEMs are insourcing more and more of their systems and software development directly.

During 2022, the company’s Automotive customers shipped approximately 0.8 million products.

Printers and Office Equipment

The company has operational license agreements with three of the leading global printers and office equipment OEMs. During 2022, the company’s customers shipped approximately 4 million printers using its touch technology and since mid-2014 they have shipped approximately 51 million printers using the company’s touch technology.

Military and Avionics

Mechanical switches and buttons and older types of touch displays in airplane cockpits are increasingly being replaced with larger touch displays with higher performance capabilities. The company’s zForce technology has demonstrable advantages for these types of applications, as it provides low latency, superior image clarity, can be operated by pilots wearing gloves, has excellent electro-magnetic interference and electro-magnetic compatibility properties, and works well with night vision systems. zForce is also suitable for other military applications for these reasons.

Industrial Automation

The company sees interesting opportunities for its optical touch and gesture control solutions in the rugged industrial touchscreen market. The company also sees potential demand for its machine perception solutions in industrial settings.

Medical

The company sells its TSMs to customers manufacturing and selling medical imaging systems with touch screens. Looking to the future, the company sees interesting opportunities for its TSMs to be incorporated into similar touch applications, and for various contactless touch applications, and opportunities for the company’s zForce-based optical touch and gesture control solutions in the medical touchscreen market.

Elevators and Interactive Kiosks

Using the company’s TSMs, OEMs can easily create safe, intuitive, and easy-to-use contactless touch interfaces for their elevator and kiosk products. The company’s TSMs are also very suitable for retrofit applications and many of the company’s OEM customers, value-added resellers, and technology partners have or are developing such solutions and marketing and selling them in their respective markets. The company has a strong and increasing demand for the company’s TSMs from customers in these markets.

Customers

As of December 31, 2022, the company had 35 valid technology license agreements. During the year ended December 31, 2022, the company had 11 customers using the company’s touch technology in products that were being shipped to their customers. The products related to these license agreements include e-readers, tablets, commercial and consumer printers, automotive infotainment system displays, and global positioning system (GPS) devices.

The company’s customers are primarily located in North America, Europe and Asia. Customers who accounted for 10% or more of the company’s revenues during the year ended December 31, 2022 were Hewlett-Packard Company – 27%, Seiko Epson – 19%, LG – 12%, and Alpine Electronics – 10%.

Intellectual Property

In 2022, the company filed six new patent applications and had two new patent grants issued; certain other patents have lapsed.

The duration of the company’s patent protection for utility patents is generally 20 years. The duration of the company’s patent protection for design patents varies throughout the world between 10 and 25 years, depending on the jurisdiction.

The company’s trademarks include Neonode (29 registrations, 5 pending applications), the Neonode logo (15 registrations), zForce (11 registrations), and MultiSensing (7 registrations).

The company uses Neonode, the company’s logo, zForce, MultiSensing, AirBar and other marks as trademarks.

Research and Development

For the year ended December 31, 2022, the company spent $4.0 million on research and development activities.

Competition

The company’s competitors among Tier 2 software providers include SmartEye, Cipia, Xperi, EyeSight, Seeing Machines, PUX and Jungo.

History

Neonode Inc. was incorporated in the state of Delaware in 1997.