Neonode Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; filed March 9, 2023. This is an annual report, and the supplied filing text does not provide standalone fourth-quarter results.
Business context
Neonode develops optical sensing and machine-perception technology, earning revenue from technology licenses, touch sensor module (TSM) product sales, and non-recurring engineering (NRE) services. Its markets include printers and office equipment, automotive, and emerging contactless-touch applications. At year-end it reported 35 valid technology license agreements and 11 customers shipping products using its technology.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $5.670 million | $5.836 million |
| Gross profit / margin | $4.866 million / 85.8% | $4.881 million / 83.6% |
| Operating loss | $(5.286) million | $(7.107) million |
| Net loss attributable to Neonode | $(4.883) million | $(6.450) million |
| Loss per share, basic and diluted | $(0.36) | $(0.54) |
| Cash used in operating activities | $(6.808) million | $(7.678) million |
| Cash at year-end | $14.816 million | $17.383 million |
| Working capital | $19.1 million | $19.1 million |
Revenue comprised $4.470 million in license fees (78.8%), $995,000 in products (17.5%), and $205,000 in NRE (3.6%). Total operating expenses fell 15.3% to $10.152 million; R&D rose 11.8% to $3.963 million, while sales and marketing declined 28.4% to $2.034 million and general and administrative expense fell 25.8% to $4.155 million.
Total assets were $21.198 million and total liabilities were $1.780 million at year-end. Cash and cash equivalents were the principal liquidity resource. Finance lease obligations totaled $141,000; operating lease obligations totaled $118,000. Inventory was $3.827 million, up from $2.520 million, including a $300,000 reserve for AirBar inventory. The filing reports no conventional borrowings.
Financing activities provided $4.509 million in 2022, mainly from ATM share sales, compared with $14.575 million in 2021. The company sold 886,065 shares through its ATM program in 2022 for approximately $4.686 million net. In January 2023, it sold another 903,716 shares for approximately $7.868 million net.
Changes versus FY2021
- Revenue declined 2.8%, principally because license fees fell 6.6%; product revenue increased 4.2% and NRE revenue more than doubled from a low base.
- Operating loss narrowed by $1.821 million, and net loss attributable to Neonode narrowed by $1.567 million.
- Overall gross margin rose to 85.8% from 83.6%. Product gross margin increased to 22.0% from 3.5%, with both periods affected by one-time TSM inventory write-down adjustments.
- Cash decreased by $2.567 million. Lower operating cash use and reduced equity proceeds versus 2021 contributed to the year-over-year change.
- Neonode acquired the remaining 49% of Pronode Technologies AB on October 1, 2022; the reported equity transaction was $4.441 million.
Outlook, commentary and risks
- Management plans to expand TSM offerings and partner distribution, and expects HMI product and remote-sensing sales could become the majority of revenue over time. It provided no quantified revenue or earnings guidance.
- Management attributed weaker license revenue to component shortages affecting printer and automotive customers, and product sales to COVID-related lockdowns in Asia and lengthy customer development and launch cycles. It reported some recovery in the second half of 2022.
- Year-end TSM backlog was approximately $224,000, covering orders for one customer; orders may be rescheduled or cancelled and are not necessarily indicative of future revenue.
- The company has incurred recurring losses and used $6.808 million of operating cash in 2022. Management said cash, its operating plan and potential capital sources were sufficient to alleviate going-concern concerns, but warned that additional financing may be needed if operations do not become cash-flow positive. Future equity financing could dilute shareholders.
- Revenue and receivables are concentrated: four customers represented approximately 68% of 2022 revenue; Hewlett-Packard, Seiko Epson, LG and Alpine Electronics accounted for 27%, 19%, 12% and 10%, respectively. Five customers represented approximately 83% of year-end accounts receivable and unbilled revenue.
- Other principal risks include dependence on customers’ product shipments, long and unpredictable design cycles, reliance on key component suppliers, difficulty verifying royalty reports, competition, foreign-exchange exposure, and the need to protect intellectual property. Unbilled license revenue estimates were identified by the auditor as a critical audit matter because they rely on management estimates and customer royalty information.
- The company reported no pending legal proceedings against Neonode. Separate patent litigation brought by Aequitas Technologies LLC subsidiaries against Apple and Samsung remained ongoing; Neonode had assigned patents to Aequitas and may share potential net proceeds.
Investor facts to verify
- Whether post-year-end ATM proceeds and any subsequent share issuance materially changed cash, share count, or dilution; 15,359,481 shares were outstanding on March 3, 2023.
- Customer shipment trends and the sustainability of license royalties, especially given customer and end-market concentration.
- Whether TSM sales, backlog conversion, product margins, and inventory levels support management’s planned shift toward products.
- Cash burn, financing needs, and progress toward positive operating cash flow; review the assumptions underlying management’s going-concern assessment.
- Royalty estimation and collection practices, including the unbilled-license-revenue estimates highlighted in the audit.