ITEM 1. BUSINESS
About Us
Neonode provides advanced optical sensing solutions for touch, contactless touch, and gesture sensing. We also provide 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. We base our contactless touch, touch, and gesture sensing products and solutions using our zForce technology platform and our machine perception solutions on our MultiSensing technology platform. We market and sell our 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, we began licensing to Original Equipment Manufacturers (“OEMs”) and automotive Tier 1 suppliers who embed our technology into products they develop, manufacture, and sell. Since 2010, our licensing customers have sold over 95 million products that feature our technology.
In October 2017, we augmented our licensing business and began manufacturing and shipping touch sensor modules (“TSMs”) that incorporate our patented technology. On December 12, 2023, we announced a new, sharpened strategy with full focus on the licensing business. Consequently, we phased out the TSM product business during 2024 through licensing of the TSM technology to strategic partners and in parallel we sold parts of the remaining TSMs. The phase out of our TSM product business meets the criteria to be reported as discontinued operations. Refer to Note 2 of Notes to the Consolidated Financial Statements for additional discussion of discontinued operations. All following information present continuing operations.
During 2024, we also continued to focus our efforts on maintaining our current licensing customers and achieving design wins for new programs both with current and future customers.
Licensing
We license our zForce and MultiSensing technology to OEMs and automotive Tier 1 suppliers who embed our technology into products that they develop, manufacture and sell. Since 2010, our licensing customers have sold over 95 million devices that use our patented technology.
As of December 31, 2024, we had 37 valid technology license agreements with global OEMs, ODMs and automotive Tier 1 suppliers.
Our licensing customer base is primarily in the automotive and printer segments. Nine of our licensing customers are currently shipping products that embed our technology. We anticipate current customers, except of one, will continue to ship products with our technology in 2025 and in future years. We also expect to expand our customer base with a number of new customers who will be looking to ship new products incorporating our zForce and MultiSensing technologies as they complete final product development and release cycles. Typically, our licensing customers require engineering support during the development and initial manufacturing phase for their products using our technology. For more details on non-recurring engineering (“NRE”) services please refer to the section below. We typically earn our license fees on a per unit basis when our customers ship products using our technology, but in the future we may use other business models as well.
1
Non-recurring Engineering Services
We also offer NRE services related to application development linked to our zForce and MultiSensing technology platforms on a flat rate or hourly rate basis.
Typically, our licensing customers require engineering support during the development and initial manufacturing phase for their products using our technology. In this case we can offer NRE services and earn NRE revenues.
Strategy and Focus Areas
Our customers use touch, contactless touch, gesture sensing, and machine perception technologies to grow their businesses, drive efficiencies, and seek competitive advantages. Our strategy is to deliver value-adding human-machine interaction (“HMI”) and machine perception solutions that enable our customers to achieve these targets. We offer specialized NRE services related to the integration of our solutions into customer systems and products to ensure that optimal functionality and performance is achieved.
With the sharpened strategy, announced in December 2023, we focus solely on the licensing business. This allows customers to license our unique and advanced TSM technology to create bespoke products and solutions that bring value to end customers. We continue to be a leader in optical touch and gesture sensing by licensing our zForce technology to customers in the printer, automotive, and other sectors. We also aim to capture a significant share of the growing automotive driver and in-cabin monitoring market by developing our machine perception business. We are innovators in the HMI and machine perception areas and our goal is to introduce next-generation products in these areas that offer better price, performance, and architectural advantages compared to our current offers and those of our competitors. We intend to execute on this strategy through portfolio transformation, internal innovation, and co-development of products with our customers and the building of strategic partnerships with other technology companies.
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, we mainly act as a Tier 2 technology provider to Tier 1 suppliers who license our technology and deliver different types of systems to OEMs (e.g. our driver and in-cabin monitoring solution or our touch technology). In some cases, we are also engaged directly by OEMs, following the trend that OEMs are insourcing more and more of their systems and software development.
During 2024 and 2023, our automotive customers shipped approximately 0.5 million and 0.9 million products with our technology, respectively. Accumulated, since 2014, our automotive customers have shipped approximately 8.5 million products featuring our technology.
Printers and Office Equipment
Multi-function printers typically feature touch displays for user interaction with feature-rich menus and settings. We have operational license agreements with three of the leading global printers and office equipment OEMs. During 2024 our customers shipped approximately 2.4 million printers using our touch technology and since mid-2014 they have shipped approximately 57.3 million printers using our touch technology.
Rugged and Larger Touch Displays
Following the decision in December 2023 to transform our zForce business to a licensing only business model, we see an increasing number of opportunities for our optical touch and gesture control solutions in the rugged industrial touchscreen market as well as for cost efficient touch solutions for larger touch displays i.e. 21 inch and above where we offer lower cost per inch on larger displays compared to PCAP. Easily integrated using a single-sided TSM sensor or a full-frame zForce implementation, Neonode’s licensable touch interaction technology platforms deliver exceptional performance and value to any touch-operated application. We also see potential demand for our machine perception solutions in industrial settings.
2
Amusement
Following the announcement that Nexty Electronics has selected Neonode’s TSM technology for sensor development and manufacturing of the next-generation slot machines for a leading manufacturer in Japan’s amusement market, we see further potential to deliver our technology to companies in the Japanese amusement market as well as in other markets that desire high quality, cost-effective touch functionality on large displays and surfaces.
Holographic Interaction
Using our TSM technology to facilitate interaction with a hologram, allows us to create immersive experiences with a “wow factor” in the infotainment sector e.g. museums, receptions, AI avatars etc. We also see an increasing potential for surgical planning and education, enabling virtual explorations and interactive learning.
Customers
Our customers are primarily located in North America, Europe and Asia.
As of December 31, 2024, four of our customers represented approximately 80.9% of our consolidated accounts receivable and unbilled revenues.
As of December 31, 2023, three of our customers represented approximately 77.8% of our consolidated accounts receivable and unbilled revenues.
Customers who accounted for 10% or more of our revenues during the year ended December 31, 2024 are as follows.
● Seiko Epson – 27.3%
-----------------------------------
● Alpine Electronics – 20.7%
● Hewlett-Packard Company – 20.4%
● Commercial Vehicle OEM – 11.8%
Customers who accounted for 10% or more of our revenues during the year ended December 31, 2023 are as follows.
● Hewlett-Packard Company – 33.3%
-----------------------------------
● Seiko Epson – 20.2%
● Alpine Electronics – 18.2%
● LG Electronics – 13.1%
3
Customers by Market
The following table presents our revenues by market as a percentage of total revenues:
Years
ended December 31,
------------------------------------------------------------------------------------------
2024 2023
Net license revenues from amusement 4.8 % - %
Net license revenues from automotive 30.5 % 40.7 %
Net license revenues from consumer electronics 51.2 % 58.6 %
Net non-recurring engineering 13.5 % 0.7 %
services revenues
Total 100.0 % 100.0 %
Geographical Data
The following table presents our revenues by geographic region as a percentage of total revenues:
Years
ended December 31,
---------------------------------------------------------
2024 2023
Japan 55.8 % 38.5 %
United States 24.5 % 38.0 %
Sweden 11.7 % - %
Germany 3.7 % 9.9 %
South Korea 3.1 % 13.1 %
China 1.0 % 0.5 %
Other 0.2 % - %
Total 100.0 % 100.0 %
The following table presents our total assets by geographic region:
December
31,
------------------------------------------------------
(in thousands) 2024 2023
United States $16,951 $16,084
Sweden 1,406 1,682
Asia 24 42
Total $18,381 $17,808
Competition
There are various technologies for touch and gesture control solutions available that compete with our optical zForce technology. The competing technologies have differing profiles such as performance, power consumption, level of maturity and cost. For touch solutions, the main competition comes from resistive and capacitive touch solutions. For touch displays, projective capacitive technology is the prevalent standard in mobile phones and tablets and therefore an important competing technology to ours that many suppliers offer with price being a major differentiation point. This means we must continuously develop our technology and improve our offers to defend and grow our market share. For gesture control the main competition comes from other optical technologies and from both ultrasonic and radar technologies. Examples of competitors active in the area of gesture sensing include Ultraleap and suppliers of radar and ultrasonic sensor chips, for instance Texas Instruments and Acconeer. Detection range, resolution and cost are the main differentiators.
For contactless touch opportunities, competing technologies include camera-based technologies for detecting finger placement and gestures in the airspace in front of a kiosk or button panel, capacitive sensors capable of detecting a finger hovering above a display or button, as well as voice-activated interfaces and interfaces using one’s mobile phone to interact with a kiosk or button panel.
There are various driver and in-cabin monitoring solutions that compete with our MultiSensing technology. Our competitors among Tier 2 software providers include SmartEye, Cipia, Xperi, Seeing Machines, PUX and Jungo.
4
Intellectual Property
We rely on a combination of intellectual property laws and contractual provisions to establish and protect the proprietary rights in our technology. The number of our issued and pending patents and patents filed in each jurisdiction as of December 31, 2024 is set forth in the following table:
Jurisdiction No. No. No. of Patents
of Reg. of Pending
Designs Issued Patents
----------------------------------------------------------------------------------------------
United States 5 46 6
Europe - 13 4
Japan - 8 1
China - 6 2
South Korea - 6 2
Patent Convention Treaty Not Applicable Not Applicable 1
Total: 5 79 16
Our patents cover optical blocking technologies for touchscreens and head-up displays, optical reflective technologies for contactless interaction with kiosks and elevators, as well as machine perception solutions for driver and in-cabin monitoring.
Our software may also be protected by copyright laws in most countries, including Sweden and the European Union, if the software is deemed new and original. Protection can be claimed from the date of creation.
In 2024 we filed four new patent applications and had seven new patent grants issued; eleven patents lapsed, and one patent application was abandoned.
The duration of our patent protection for utility patents is generally 20 years. The duration of our patent protection for design patents varies throughout the world between 10 and 25 years, depending on the jurisdiction. We believe the duration of our intellectual property rights is adequate relative to the expected lives of our products.
We also protect and promote our brand by registering trademarks in key markets around the world. Our trademarks include: Neonode (26 registrations, 1 pending applications), the Neonode logo (8 registrations), zForce (10 registrations), and MultiSensing (3 registrations).
Research and Development
In fiscal years 2024 and 2023, we incurred $3.4 million and $3.8 million, respectively, on research and development activities. Our research and development is performed predominantly in-house, but may also be performed in collaboration with external partners and specialists.
Human Capital
We recognize that the development, attraction and retention of employees is critical to our success. For this reason, we strive to provide a positive work culture for our employees.
We focus on skills enhancement, leadership development, innovation excellence and professional growth throughout our employees’ careers. Our leadership program provides leadership trainings to our high-potential emerging leaders.
5
We provide market competitive compensation aligned with company performance. We provide a comprehensive benefits package to our employees, including healthcare and retirement plans. We have a dedicated human resources (HR) person to ensure clear and beneficial HR-related processes and strategy. We work proactively against all discrimination, harassment and other abusive behavior to ensure the work environment at Neonode is good and healthy. We believe that a diverse workforce provides different viewpoints on business strategy, risk and innovation.
Since the COVID-19 pandemic has subsided we have adopted a hybrid workplace. While we encourage employees to work from the office as much as possible, employees are permitted to work part time from home.
As of December 31, 2024, we had 43 employees (including 40 full-time employees) and 7 consultants. We have employees and/or consultants located in the United States, Sweden, United Kingdom, Japan and Taiwan. None of our employees are represented by a labor union. We have experienced no work stoppages. We believe our employee relations are positive.
Additional Information
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and we file or furnish reports, proxy statements, and other information with the Securities and Exchange Commission (“SEC”). The reports and other information filed by us with the SEC are available free of charge on the SEC’s website at www.sec.gov.
Our website is www.neonode.com. We make available free of charge through our website all of our filings with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K as well as Form 3, Form 4, and Form 5 reports for our directors, officers, and principal stockholders, together with amendments to those reports filed or furnished pursuant to Sections 13(a), 15(d), or 16 under the Exchange Act. These reports are available as soon as reasonably practicable after their electronic filing or furnishing with the SEC. Our website also includes corporate governance information, such as our Code of Business Conduct (including a Code of Ethics for the Chief Executive Officer and Senior Financial Officers) and our Board of Directors’ Committee Charters. The information contained on our website is not a part of, nor is it incorporated by reference into, this Annual Report.