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What changed in Neonode Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Neonode Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+136 added−156 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-09)

Top changes in Neonode Inc.'s 2023 10-K

136 paragraphs added · 156 removed · 114 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeAs of December 31, 2021, four of our customers represented approximately 76% of our consolidated accounts receivable and unbilled revenues. 3 Customers who accounted for 10% or more of our revenues during the year ended December 31, 2022 are as follows. ● Hewlett-Packard Company – 27% ● Seiko Epson – 19% ● LG – 12% ● Alpine Electronics – 10% Customers who accounted for 10% or more of our revenues during the year ended December 31, 2021 are as follows. ● Hewlett-Packard Company – 32% ● Seiko Epson – 18% ● LG – 13% Customers by Market The following table presents our revenues by market as a percentage of total revenues for the years ended December 31: 2022 2021 Automotive (license fees) 27 % 27 % Consumer electronics (license fees) 51 % 55 % TSMs (products) 18 % 16 % Non-recurring engineering 4 % 2 % Total 100 % 100 % Geographical Data The following table presents our revenues by geographic region as a percentage of total revenues for the years ended December 31: 2022 2021 U.S. 33 % 39 % Japan 31 % 33 % South Korea 15 % 15 % Switzerland 7 % 1 % Germany 5 % 5 % Other 9 % 7 % Total 100 % 100 % The following table presents our total assets by geographic region as of December 31 (in thousands): 2022 2021 U.S. $ 15,630 $ 17,589 Sweden 5,511 5,353 Asia 57 50 Total $ 21,198 $ 22,992 Competition There are various technologies for touch and gesture control solutions available that compete with our optical zForce technology.
Biggest changeAs of December 31, 2022, five of our customers represented approximately 82.5% of our consolidated accounts receivable and unbilled revenues. 3 Customers who accounted for 10% or more of our revenues during the year ended December 31, 2023 are as follows. ● Hewlett-Packard Company – 22.1% ● Seiko Epson – 17.7% ● Alpine Electronics – 16.6% Customers who accounted for 10% or more of our revenues during the year ended December 31, 2022 are as follows. ● Hewlett-Packard Company – 27.1% ● Seiko Epson – 19.4% ● LG – 12.2% ● Alpine Electronics – 10.0% Customers by Market The following table presents our revenues by market as a percentage of total revenues for the years ended December 31: 2023 2022 Net license revenues from automotive 35.1 % 27.4 % Net license revenues from consumer electronics 50.4 % 51.5 % Net product revenues from TSMs 13.9 % 17.5 % Net non-recurring engineering services revenues 0.6 % 3.6 % Total 100.0 % 100.0 % Geographical Data The following table presents our revenues by geographic region as a percentage of total revenues for the years ended December 31: 2023 2022 United States 35.8 % 32.5 % Japan 33.5 % 30.7 % South Korea 11.3 % 15.2 % Germany 9.0 % 5.3 % Switzerland 5.0 % 7.0 % China 1.8 % 2.3 % France 1.5 % 3.4 % Sweden 1.2 % 2.7 % Other 0.9 % 0.9 % Total 100.0 % 100.0 % The following table presents our total assets by geographic region as of December 31 (in thousands): 2023 2022 United States $ 16,084 $ 15,630 Sweden 2,888 5,511 Asia 42 57 Total $ 19,014 $ 21,198 Competition There are various technologies for touch and gesture control solutions available that compete with our optical zForce technology.
ITEM 1. BUSINESS Our company provides advanced optical sensing solutions for contactless touch, 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.
ITEM 1. BUSINESS Our company 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. zForce (zero force) is the name for our patented optical sensing technology built on infrared light, invisible to the human eye.
We base our touch, contactless touch, and gesture sensing products and solutions using our zForce technology platform and our machine perception solutions on our MultiSensing technology platform. zForce (zero force) is the name for our patented optical sensing technology built on infrared light, invisible to the human eye.
Our TSMs are commercial-off-the-shelf products based on our patent-protected zForce technology platform and can support the development of contactless touch, touch, gesture and object sensing solutions that, paired with our technology licensing offering, give us a full range of options to enter and compete in key markets.
The TSMs are commercial-off-the-shelf products based on our patent-protected zForce technology platform and can support the development of contactless touch, touch, gesture and object sensing solutions that, paired with our technology licensing offering, give us a full range of options to enter and compete in key markets.
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 and performance and architectural advantages compared to our current offers and those of our competitors.
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.
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, EyeSight, Seeing Machines, PUX and Jungo. Intellectual Property We rely on a combination of intellectual property laws and contractual provisions to establish and protect the proprietary rights in our technology.
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. Intellectual Property We rely on a combination of intellectual property laws and contractual provisions to establish and protect the proprietary rights in our technology.
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. Product sales In addition to our technical solutions business, we design and manufacture TSMs that incorporate our patented technology.
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. Product Sales In addition to our licensing business, we design and manufacture TSMs that incorporate our patented technology.
Non-recurring engineering services We also offer NRE services related to application development linked to our TSMs and our zForce and MultiSensing technology platforms on a flat rate or hourly rate basis.
Non-recurring Engineering Services We also offer non-recurring engineering (“NRE”) services related to application development linked to our TSMs and our zForce and MultiSensing technology platforms on a flat rate or hourly rate basis.
Our MultiSensing platform was designed to provide advanced, safe and traceable software applications to provide situational context. 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.
Our MultiSensing platform was designed to provide advanced, safe, and scalable software solutions to provide situational context. 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.
We have the following wholly owned subsidiaries: Neonode Technologies AB (Sweden) (established in 2008 to develop and license touchscreen technology); Neonode Japan Inc., (Japan) (established in 2013); and Neonode Korea Ltd. (South Korea) (established in 2014). In 2015, we established a 51% majority owned consolidated subsidiary, Pronode Technologies AB (Sweden).
We have the following wholly owned subsidiaries: Neonode Technologies AB (Sweden) (established in 2008 to develop and license touchscreen technology); Neonode Japan Inc., (Japan) (established in 2013); and Neonode Korea Ltd. (South Korea) (established in 2014). Neonode Korea Ltd. is currently dormant. In 2015, we established a 51% majority owned consolidated subsidiary, Pronode Technologies AB (Sweden).
The number of our issued and pending patents and patents filed in each jurisdiction as of December 31, 2022 is set forth in the following table: Jurisdiction No. of Reg.
The number of our issued and pending patents and patents filed in each jurisdiction as of December 31, 2023 is set forth in the following table: Jurisdiction No. of Reg.
As of December 31, 2022, we had 10 agreements with value added resellers (“VARs”) for integration of our TSMs in the products they offer to global OEMs, ODMs and systems integrators. In addition to this, we distribute our TSMs through Digi-Key Corporation, Serial Microelectronics HK Ltd, and Nexty Electronics Corporation.
As of December 31, 2023, we had nine agreements with value added resellers (“VARs”) for integration of our TSMs in the products they offer to global OEMs, ODMs and systems integrators. In addition to this, we distribute our TSMs through Digi-Key Corporation, Serial Microelectronics HK Ltd., and Nexty Electronics Corporation.
On October 1, 2022, we acquired the remaining shares in Pronode Technologies AB. Strategy and Focus Areas Our customers use contactless touch, touch, gesture sensing, and computer vision technologies to grow their businesses, drive efficiencies, and seek competitive advantages.
On October 1, 2022, we acquired the remaining shares in Pronode Technologies AB. 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.
Since 2010, our licensing customers have sold approximately 90 million devices that use our patented technology. As of December 31, 2022, we had 35 valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers. Our licensing customer base is primarily in the automotive and printer segments.
Since 2010, our licensing customers have sold approximately 95 million devices that use our patented technology. As of December 31, 2023, we had 34 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.
Eleven of our licensing customers are currently shipping products that embed our technology. We anticipate current customers will continue to ship products with our technology in 2023 and in future years.
Ten of our licensing customers are currently shipping products that embed our technology. We anticipate current customers will continue to ship products with our technology in 2024 and in future years.
In 2010, we began licensing to Original Equipment Manufacturers (“OEMs”) and Tier 1 suppliers who embed our technology into products they develop, manufacture, and sell. Since 2010, our licensing customers have sold approximately 90 million devices that use our technology.
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 approximately 95 million products that feature our technology.
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 2022 we filed six new patent applications and had two new patent grants issued; certain other patents have lapsed.
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 2023 we filed eleven new patent applications and had nine new patent grants issued; five patents have lapsed.
We also protect and promote our brand by registering trademarks in key markets around the world. Our trademarks include: Neonode (29 registrations, 5 pending applications), the Neonode logo (15 registrations), zForce (11 registrations), and MultiSensing (7 registrations). Research and Development In fiscal years 2022 and 2021, we incurred $4.0 million and $3.5 million, respectively, on research and development activities.
We also protect and promote our brand by registering trademarks in key markets around the world. Our trademarks include: Neonode (26 registrations, 2 pending applications), the Neonode logo (8 registrations), zForce (10 registrations), and MultiSensing (3 registrations). Research and Development In fiscal years 2023 and 2022, we incurred $3.8 million and $4.0 million, respectively, on research and development activities.
Designs No. of Issued Patents No. of Patents Pending United States 5 48 9 Europe 2 11 5 Japan - 7 1 China - 6 1 South Korea - 6 1 Australia 1 - - Singapore 2 - - Patent Convention Treaty Not Applicable Not Applicable 1 Total: 10 78 18 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.
Designs No. of Issued Patents No. of Patents Pending United States 5 53 10 Europe - 11 4 Japan - 7 2 China - 6 2 South Korea - 6 2 Total: 5 83 20 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.
Since the COVID-19 pandemic has subsided we have adopted a hybrid workplace. While we encourage employees to come into the office as much as possible, employees are permitted to work from home a few days each week As of December 31, 2022, we had 55 employees (including 45 full-time employees) and 7 consultants.
Since the COVID-19 pandemic has subsided we have adopted a hybrid workplace. While we encourage employees to come into the office as much as possible, employees are permitted to work part time from home. As of December 31, 2023, we had 53 employees (including 49 full-time employees) and 8 consultants.
Industrial Automation We see interesting opportunities for our optical touch and gesture control solutions in the rugged industrial touchscreen market. We also see potential demand for our machine perception solutions in industrial settings. Medical We sell our TSMs to customers manufacturing and selling medical imaging systems with touch screens.
We also see potential demand for our machine perception solutions in industrial settings. Medtech We sell our TSMs to customers manufacturing and selling medical imaging systems with touch screens. Looking to the future, we see interesting opportunities to license our zForce-based optical touch and gesture control solutions to manufacturers of different medtech systems.
Our TSMs are also very suitable for retrofit applications and many of our OEM customers, value-added resellers, and technology partners have or are developing such solutions and marketing and selling them in their respective markets.
Using our TSMs, OEMs can easily create safe, intuitive, and easy-to-use contactless touch interfaces for their elevator and kiosk products. Our TSMs are also very suitable for retrofit applications and many of our OEM customers, value-added resellers, and technology partners have or are developing such solutions and marketing and selling them in their respective markets.
We sell our TSMs to OEMs, ODMs and systems integrators for use in their products. We also sell our Neonode branded AirBar product that incorporates one of our TSMs through distributors. We utilize a robotic manufacturing process designed specifically for our components.
We sell our TSMs to OEMs, ODMs and systems integrators for use in their products. We utilize a robotic manufacturing process designed specifically for our TSMs.
We also aim to capture a share of the growing automotive driver and in-cabin monitoring market by developing our machine perception business.
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.
None of our employees are represented by a labor union. We have experienced no work stoppages. We believe our employee relations are positive.
We have employees and/or consultants located in the United States, Sweden, United Kingdom, Japan, South Korea 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.
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 directly. During each of 2022 and 2021, our Automotive customers shipped approximately 0.8 million products. Printers and Office Equipment Multi-function printers typically feature touch displays for user interaction with feature-rich menus and settings.
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 2023 and 2022, our automotive customers shipped approximately 0.9 million and 0.8 million products with our technology, respectively. Accumulated, since 2014, our automotive customers have shipped approximately 8 million products featuring our technology.
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. Our customers are primarily located in North America, Europe and Asia. As of December 31, 2022, five of our customers represented approximately 83% of our consolidated accounts receivable and unbilled revenues.
During the year ended December 31, 2023, we had 10 customers using our 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. Our customers are primarily located in North America, Europe and Asia.
Elevators and Interactive Kiosks The COVID-19 pandemic has created strong consumer demand for technologies that eliminate direct physical contact between users and different types of machines and systems in public environments such as self-service kiosks, vending machines, and elevators. Using our TSMs, OEMs can easily create safe, intuitive, and easy-to-use contactless touch interfaces for their elevator and kiosk products.
Elevators and Interactive Kiosks There is strong consumer demand for HMI technologies that improve the user experience and eliminate direct physical contact between users and different types of machines and systems in public environments such as self-service kiosks, vending machines, and elevators.
Our cycle time between order and shipment is generally short and customers occasionally change delivery schedules. Additionally, orders can be cancelled without significant penalties. As a result of these factors, we do not believe that our product backlog, as of any particular date, is necessarily indicative of actual product revenue for any future period.
The product backlog includes orders confirmed for products planned to be shipped within 12 months to one customer. Our cycle time between order and shipment is generally short and customers occasionally change delivery schedules. Additionally, orders can be cancelled without significant penalties.
We expect that over time the sales of HMI products and Remote Sensing Solutions may constitute the majority of our revenue. 1 License fees We license our zForce technology to OEMs and Tier 1 suppliers who embed our technology into products they develop, manufacture and sell.
Consequently, we will phase out the TSM product business during 2024 through licensing of the TSM technology to strategic partners or outsourcing. 1 Licensing We license our zForce technology to OEMs and automotive Tier 1 suppliers who embed our technology into products that they develop, manufacture and sell.
In October 2017, we began selling our TSMs to customers in the industrial and consumer electronics segments. Over time, we expect a significant portion of our revenues will be derived from TSM sales.
We began selling our TSMs to customers in the industrial and consumer electronics segments in 2017. We will phase out the TSM product business during 2024 through licensing of the TSM technology to strategic partners or outsourcing.
We made investments enhancing the design and improving the production yield of our TSMs and improving the related firmware and configuration tools software platforms. We also made investments to expand our partner networks for sales and distribution of TSMs.
We made investments enhancing the design and improving the production yield of our TSMs in our production unit Pronode Technologies AB and improving the related firmware and configuration tools software platforms. On December 12, 2023, we announced a new, sharpened strategy with full focus on the licensing business.
We have operational license agreements with three of the leading global printers and office equipment OEMs. During 2022 our customers shipped approximately 4 million printers using our touch technology and since mid-2014 they have shipped approximately 51 million printers using our touch 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.
Revenues are however primarily monitored for each of our revenue streams consisting of license fees, product sales and non-recurring engineering (“NRE”) services. During 2022 and 2021 we continued to focus our efforts on maintaining our current licensing customers and achieving design wins for new products both with current and future customers.
During 2023, we continued to focus our efforts on maintaining our current licensing customers and achieving design wins for new programs both with current and future customers. In parallel we continued to market and sell TSMs directly and indirectly through partners.
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In our operations, we have since the beginning of 2020 focused on three different business areas, HMI Solutions, HMI Products and Remote Sensing Solutions (“HMI” is short for Human-Machine Interaction).
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With the new, 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.
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On May 4, 2021, we announced a new strategy and organizational update targeting an increased focus on our contactless touch business and on current market opportunities in North America (“AMER”), Asia-Pacific (“APAC”), and Europe, Middle East and Africa (“EMEA”). As a result, we transitioned from a business area organization to a regional sales organization going forward.
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During 2023 our customers shipped more than 3 million printers using our touch technology and since mid-2014 they have shipped approximately 55 million printers using our touch technology. Industrial Automation We see interesting opportunities for our optical touch and gesture control solutions in the rugged industrial touchscreen market.
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We intend to continue expanding our TSM product offerings in 2023 and beyond, including new TSM variants and new sensor products for delivery to our key markets.
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Customer demand has decreased after the COVID-19 pandemic ended and in 2024 we will phase out the TSM product business. OEM customers, value-added resellers, and technology partners can still access our technology through licensing. Product Backlog Our TSM product backlog as of December 31, 2023 was approximately $34,000.
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Our goal is to become a market leader in the area of contactless touch interfaces, expanding our TSM sales in the elevator and interactive kiosk segments where our contactless touch technology provides end-customer value and increased competitiveness for our customers, value-added resellers, and technology partners, while continuing to be a leader in optical touch and gesture sensing by licensing our zForce technology to customers in the printer, automotive, and other sectors.
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As a result of these factors, we do not believe that our product backlog, as of any particular date, is necessarily indicative of actual product revenue for any future period. Customers As of December 31, 2023 we had 34 valid technology license agreements. As of December 31, 2022, that number was 35.
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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.
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As of December 31, 2023, four of our customers represented approximately 76.4% of our consolidated accounts receivable and unbilled revenues.
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Our 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.
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Looking to the future, we see interesting opportunities for our TSMs to be incorporated into similar touch applications, and for various contactless touch applications, and opportunities for our zForce-based optical touch and gesture control solutions in the medical touchscreen market.
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We have a strong and increasing demand for our TSMs from customers in these markets and expect to grow this business significantly in the coming years. Product Backlog Our TSM product backlog as of December 31, 2022 was approximately $224,000. The product backlog includes orders confirmed for products planned to be shipped within 12 months to one customer.
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Customers As of December 31, 2022 we had 35 valid technology license agreements. As of December 31, 2021, that number was 34. During the year ended December 31, 2022, we had 11 customers using our touch technology in products that were being shipped to their customers.
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There was a total of 13 employees in our general and administrative team, 8 in our sales and marketing team, 26 in our engineering team, and 8 in our production team at Pronode Technologies AB. We have employees and/or consultants located in the United States, Sweden, United Kingdom, Japan, South Korea and Taiwan.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeUnder our licensing model, OEMs, ODMs and Tier 1 suppliers manufacture or contract to manufacture products that include Neonode’s special Application Specific Integrated Circuits (“ASICs”) that incorporate our patented technology. The Neonode ASICs are manufactured by Texas Instruments and ST Microelectronics. Texas Instruments manufactures two ASIC components that both we and our license customers buy.
Biggest changeOur license customers rely upon component suppliers to manufacture and sell products containing our technology and limited availability of components may adversely affect our and our customers’ businesses. Under our licensing model, OEMs, ODMs and Tier 1 suppliers manufacture or contract to manufacture products that include Neonode’s special Application Specific Integrated Circuits (“ASICs”) that incorporate our patented technology.
If we and our customers are unable to obtain ASICs that incorporate our patented technology, we may not be able to meet demand, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If our customers are unable to obtain ASICs that incorporate our patented technology, we may not be able to meet demand, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Our long-term success is dependent on us obtaining sufficient capital to fund our operations, develop our touch technology and bring our technology to the worldwide market in order to generate sufficient sales volume to be profitable.
Our long-term success is dependent on us obtaining sufficient capital to fund our operations, develop our technology and bring our technology to the worldwide market in order to generate sufficient sales volume to be profitable.
In addition, the following factors, among others, may negatively affect and cause fluctuations in our operating results: ● the announcement or introduction of new products or technologies by our competitors; ● our ability to upgrade and develop our infrastructure to accommodate growth; ● our ability to attract and retain key personnel in a timely and cost-effective manner; ● technical difficulties; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; ● economic conditions specific to the industries and segments where we are active, for instance printers, automotive, elevators, and interactive kiosks; and ● general economic conditions including as a result of the ongoing COVID-19 pandemic or future pandemics or epidemics, or geopolitical conflicts such as the ongoing war in Ukraine. 9 Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service, or marketing decisions that could have a material and adverse effect on our business, results of operations, and financial condition.
In addition, the following factors, among others, may negatively affect and cause fluctuations in our operating results: ● the announcement or introduction of new products or technologies by our competitors; ● our ability to upgrade and develop our infrastructure to accommodate growth; ● our ability to attract and retain key personnel in a timely and cost-effective manner; ● technical difficulties; ● the amount and timing of operating costs and capital expenditures relating to the expansion of our business, operations, and infrastructure; ● economic conditions specific to the industries and segments where we are active, for instance printers, automotive, elevators, and interactive kiosks; and ● general economic conditions including as a result of pandemics or epidemics, or geopolitical conflicts such as the ongoing war in Ukraine or the Israel-Palestine conflict. 9 Further, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing, service, or marketing decisions that could have a material and adverse effect on our business, results of operations, and financial condition.
Section 12(g)(4) of the Exchange Act allows for the registration of any class of securities to be terminated after a company files a certification with the SEC that the number of holders of record of such class of security is fewer than 300 persons. As of February 9, 2023, there were 37 stockholders of record of our common stock.
Section 12(g)(4) of the Exchange Act allows for the registration of any class of securities to be terminated after a company files a certification with the SEC that the number of holders of record of such class of security is fewer than 300 persons. As of January 26, 2024, there were 55 stockholders of record of our common stock.
For the year ended December 31, 2022, our revenues from Asia, North America and Europe were 49%, 33%, and 18%, respectively. We incur a significant portion of our expenses in Swedish Krona, including a significant portion of our research and development expenses and a substantial portion of our general and administrative expenses.
For the year ended December 31, 2023, our revenues from Asia, North America and Europe were 47.2%, 36.0%, and 16.8%, respectively. We incur a significant portion of our expenses in Swedish Krona, including a significant portion of our research and development expenses and a substantial portion of our general and administrative expenses.
The majority of our license fees earned in 2022 and 2021 were from customer shipments of printer products and automotive infotainment systems. Although we have broadened our business model to selling sensors in addition to licensing our technology, we expect to continue to rely on licensing revenue from current and new customers whose products are still in the development cycle.
The majority of our license fees earned in 2023 and 2022 were from customer shipments of printer products and automotive infotainment systems. We continue to rely on licensing revenue from current and new customers whose products are still in the development cycle.
Our license revenues for the year ended December 31, 2022 were earned from 11 OEM, ODM and Tier 1 customers. We generated NRE revenues from five customers for the year ended December 31, 2022. During the year ended December 31, 2022, four customers represented approximately 68% of our consolidated net revenues.
Our license revenues for the year ended December 31, 2023 were earned from 10 OEM, ODM and Tier 1 customers. We generated NRE revenues from two customers for the year ended December 31, 2023. During the year ended December 31, 2023, three customers represented approximately 56.4% of our consolidated net revenues.
From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we can give no assurances that these audits will be effective.
From time to time, we audit certain of our licensees to verify independently the accuracy of the information contained in their royalty reports in an effort to decrease the likelihood that we will not receive the royalty revenues to which we are entitled under the terms of our license agreements, but we can give no assurances that these audits will be effective. 8 If we fail to develop and introduce new technology successfully, and in a cost-effective and timely manner, we will not be able to compete effectively and our ability to generate revenues will suffer .
Our customer concentration may change significantly from period-to-period depending on a customer’s product cycle and changes in our industry. In addition, our customer composition may change as we transition to selling more sensor modules in parallel to our licensing business.
Our customer concentration may change significantly from period-to-period depending on a customer’s product cycle and changes in our industry.
As part of their product development process, our customers must qualify these components for use in their products, thus making the components difficult to replace. Under our sensor model, we use a similar ASIC component supplied by ST Microelectronics in our TSM products.
The Neonode ASICs are manufactured by Texas Instruments and ST Microelectronics. Texas Instruments manufactures two ASIC components that both we and our license customers buy. As part of their product development process, our customers must qualify these components for use in their products, thus making the components difficult to replace.
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We and our license customers rely upon component suppliers to manufacture and sell products containing our technology and limited availability of components, including as a result of the COVID-19 pandemic, may adversely affect our and our customers’ businesses.
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The new business strategy with 100% focus on technology and software licensing, that we launched in December 2023, is likely to trigger changes in our customer composition and an overall reduction of the number of customers we have active engagements with.
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If the components provided by Texas Instruments, ST Microelectronics or other suppliers experience quality control or availability problems, our technology may be disqualified by one or more of our customers and our supply chain may be disrupted.
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The COVID-19 pandemic has resulted in extended shutdown of businesses all over the world causing general delays in the supply of components. We have not suffered from a supply shortage, but it is possible that the component shortage has caused delays and/or increased cost of components impacting our customers’ ability to manufacture and sell products on a cost-effective basis.
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We have limited experience in manufacturing products and our entry into the hardware market may not be successful. Our business model has historically focused on licensing touch technology. In October 2017, we began to manufacture and sell sensor touch components. There can be no assurance that our hardware manufacturing and sales will result in market acceptance or meaningful revenues.
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The commercial success of our sensor modules will depend on customer response and our management’s execution.
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The commercial success of our sensor modules is subject to numerous risks, including: ● the quality and reliability of product components that we source from third-party suppliers and incorporate in our sensor modules; ● our ability to secure product components in a timely manner, in sufficient quantities or on commercially reasonable terms; ● our ability to increase production capacity or volumes to meet demand; ● our ability to identify and qualify alternative suppliers for product components in a timely manner; and ● our ability to establish and maintain effective sales channels. 8 In addition, if demand for our products increases, we will have to invest additional resources to purchase product components, hire and train employees and enhance our manufacturing processes.
Removed
If we fail to increase our production capacity efficiently, our sales may not increase in line with our expectations and our operating margins could fluctuate or decline.
Removed
If we fail to develop and introduce new technology successfully, and in a cost-effective and timely manner, we will not be able to compete effectively and our ability to generate revenues will suffer .

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES As of December 31, 2022, we leased office facilities of approximately 6,700 square feet for our corporate headquarters in Stockholm. In addition, our subsidiary Pronode Technologies AB leases a workshop of approximately 9,000 square feet in Kungsbacka, Sweden.
Biggest changeITEM 2. PROPERTIES As of December 31, 2023, we leased office facilities of approximately 6,700 square feet for our corporate headquarters in Stockholm. In addition, our subsidiary Pronode Technologies AB leases a workshop of approximately 9,000 square feet in Kungsbacka, Sweden.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on the Nasdaq Stock Market under the symbol “NEON.” Holders As of February 8, 2023, there were 37 stockholders of record of our common stock.
Biggest changeITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock is quoted on the Nasdaq Stock Market under the symbol “NEON.” Holders As of January 26, 2024, there were 55 stockholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table presents our deferred revenues by source (in thousands); Years ended December 31, 2022 2021 Deferred revenues license fees $ 20 $ 28 Deferred revenues products 9 70 Deferred non-recurring engineering 7 8 $ 36 $ 106 19 Results of Operations A summary of our financial results for the years ended December 31, 2022 and 2021 is as follows (in thousands, except percentages): 2022 2021 Variance in Dollars Variance in Percent Revenue: License fees $ 4,470 $ 4,787 $ (317 ) (6.6 )% Percentage of revenue 78.8 % 82.0 % Products 995 955 40 4.2 % Percentage of revenue 17.5 % 16.4 % Non-recurring engineering 205 94 111 118.1 % Percentage of revenue 3.6 % 1.6 % Total Revenue $ 5,670 $ 5,836 $ (166 ) (2.8 )% Cost of Sales: Products $ 776 $ 922 $ (146 ) (15.8 )% Percentage of revenue 13.7 % 15.8 % Non-recurring engineering 28 33 (5 ) (15.2 )% Percentage of revenue 0.5 % 0.6 % Total Cost of Sales $ 804 $ 955 $ (151 ) (15.8 )% Total Gross Margin $ 4,866 $ 4,881 $ (15 ) (0.3 )% Operating Expense: Research and development $ 3,963 $ 3,546 $ 417 11.8 % Percentage of revenue 69.9 % 60.8 % Sales and marketing 2,034 2,839 (805 ) (28.4 )% Percentage of revenue 35.9 % 48.6 % General and administrative 4,155 5,603 (1,448 ) (25.8 )% Percentage of revenue 73.3 % 96.0 % Total Operating Expenses $ 10,152 $ 11,988 $ (1,836 ) (15.3 )% Percentage of revenue 179.0 % 205.4 % Operating Loss $ (5,286 ) $ (7,107 ) $ 1,821 (25.6 )% Percentage of revenue (93.2 )% (121.8 )% Interest income (expense) 100 (15 ) 115 (766.7 )% Percentage of revenue 1.8 % (0.3 )% Other income 21 - 21 - % Percentage of revenue 0.4 % - % Provision for income taxes 118 146 (28 ) (19.2 )% Percentage of revenue 2.1 % 2.5 % Less: net loss attributable to noncontrolling interests 400 818 (418 ) (51.1 )% Percentage of revenue 7.1 % 14.0 % Net loss attributable to Neonode Inc.
Biggest changeThe following table presents our deferred revenues by source (in thousands): Years ended December 31, 2023 2022 Deferred revenues license fees $ 2 $ 20 Deferred revenues products 8 9 Deferred revenues non-recurring engineering - 7 $ 10 $ 36 19 Results of Operations A summary of our financial results for the years ended December 31, 2023 and 2022 is as follows (in thousands, except percentages): 2023 2022 Variance in Dollars Variance in Percent Revenues: License fees $ 3,803 $ 4,470 $ (667 ) (14.9 )% Percentage of revenue 85.5 % 78.8 % Products 620 995 (375 ) (37.7 )% Percentage of revenue 13.9 % 17.5 % Non-recurring engineering 26 205 (179 ) (87.3 )% Percentage of revenue 0.6 % 3.6 % Total revenues $ 4,449 $ 5,670 $ (1,221 ) (21.5 )% Cost of revenues: Products $ 4,168 $ 776 $ 3,392 437.1 % Percentage of revenue 93.7 % 13.7 % Non-recurring engineering 12 28 (16 ) (57.1 )% Percentage of revenue 0.3 % 0.5 % Loss on purchase commitment 362 - 362 - % Percentage of revenue 8.1 % - % Total cost of revenues $ 4,542 $ 804 $ 3,738 464.9 % Total gross (loss) margin $ (93 ) $ 4,866 $ (4,959 ) (101.9 )% Operating expenses: Research and development $ 3,833 $ 3,963 $ (130 ) (3.3 )% Percentage of revenue 86.2 % 69.9 % Sales and marketing 2,455 2,034 421 20.7 % Percentage of revenue 55.2 % 35.9 % General and administrative 4,363 4,155 208 5.0 % Percentage of revenue 98.1 % 73.3 % Total operating expenses $ 10,651 $ 10,152 $ 499 4.9 % Percentage of revenue 239.4 % 179.0 % Operating loss $ (10,744 ) $ (5,286 ) $ (5,458 ) 103.3 % Percentage of revenue (241.5 )% (93.2 )% Other income 736 121 615 508.3 % Percentage of revenue 16.5 % 2.1 % Provision for income taxes 115 118 (3 ) (2.5 )% Percentage of revenue 2.6 % 2.1 % Less: net loss attributable to noncontrolling interests - 400 (400 ) (100.0 )% Percentage of revenue - % 7.1 % Net loss attributable to Neonode Inc.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. Overview Our company provides advanced optical sensing solutions for contactless touch, touch, and gesture sensing.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto included elsewhere in this Annual Report. Overview Our company provides advanced optical sensing solutions for touch, contactless touch, and gesture sensing.
Riley Securities a commission of 3.0% of the gross sales price per share sold under the Sales Agreement. We are not obligated to sell any shares under the Sale Agreement. The offering of shares pursuant to the Sale Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through B.
Riley Securities a commission of 3.0% of the gross sales price per share sold under the Sales Agreement. We are not obligated to sell any shares under the Sales Agreement. The offering of shares pursuant to the Sales Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through B.
Riley Securities”) with respect to an “at the market” offering program (the “ATM Facility”), under which we may, from time to time, in our sole discretion, issue and sell through B. Riley Securities, acting as sales agent, up to $25 million of shares of our common stock. Pursuant to the Sale Agreement, we may sell the shares through B.
Riley Securities”) with respect to an “at the market” offering program (the “ATM Facility”), under which we may, from time to time, in our sole discretion, issue and sell through B. Riley Securities, acting as sales agent, up to $25 million of shares of our common stock. Pursuant to the Sales Agreement, we may sell the shares through B.
Our future liquidity will be affected by, among other things: ● licensing of our technology; ● purchases of our TSMs and AirBars; ● operating expenses; ● timing of our OEM customer product shipments; ● timing of payment for our technology licensing agreements; ● gross profit margin; and ● ability to raise additional capital, if necessary.
Our future liquidity will be affected by, among other things: ● licensing of our technology; ● purchases of our TSMs; ● operating expenses; ● timing of our OEM customer product shipments; ● timing of payment for our technology licensing agreements; ● gross profit margin; and ● ability to raise additional capital, if necessary.
GAAP, companies may make reasonable aggregations and approximations of returns data to accurately estimate returns. Our AirBar and TSM returns and warranty experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve homogenous transactions.
GAAP, companies may make reasonable aggregations and approximations of returns data to accurately estimate returns. Our TSM returns and warranty experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve homogenous transactions.
Stock-Based Compensation Expense We measure the cost of employee services received in exchange for an award of equity instruments, including share options, based on the estimated fair value of the award on the grant date, and recognize the value as compensation expense over the period the employee is required to provide services in exchange for the award, usually the vesting period, net of estimated forfeitures. 18 We account for equity instruments issued to non-employees at their estimated fair value.
Stock-Based Compensation Expense We measure the cost of employee services received in exchange for an award of equity instruments, including share options, based on the estimated fair value of the award on the grant date, and recognize the value as compensation expense over the period the employee is required to provide services in exchange for the award, usually the vesting period. 18 We account for equity instruments issued to non-employees at their estimated fair value.
Riley Securities and other expenses of $244,000. 26 Future Sources of Liquidity In the future, we may require sources of capital in addition to cash on hand and our ATM Facility to continue operations and to implement our strategy. If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements.
Riley Securities and other expenses of $167,000. 26 Future Sources of Liquidity In the future, we may require sources of capital in addition to cash on hand and our ATM Facility to continue operations and to implement our strategy. If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements.
At the end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make estimates of those royalties. Explicit return rights are not offered to customers. There have been no returns through December 31, 2022.
At the end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make estimates of those royalties. Explicit return rights are not offered to customers. There have been no returns through December 31, 2023.
As of December 31, 2022, we had made no payments to TI under the NN1002 Agreement. 24 Liquidity and Capital Resources Our liquidity is dependent on many factors, including sales volume, operating profit and the efficiency of asset use and turnover.
As of December 31, 2023, we had made no payments to TI under the NN1002 Agreement. 24 Liquidity and Capital Resources Our liquidity is dependent on many factors, including sales volume, operating profit and the efficiency of asset use and turnover.
Between the second and fourth quarters of 2016, we entered into six leases for component production equipment. Under the terms of five of the lease agreements we are obligated to purchase the equipment at the end of the original 3-5 year lease terms for 5-10% of the original purchase price of the equipment.
Equipment Subject to Finance Leases Between the second and fourth quarters of 2016, we entered into six leases for component production equipment. Under the terms of five of the lease agreements, we are obligated to purchase the equipment at the end of the original 3-5 year lease terms for 5-10% of the original purchase price of the equipment.
Because we use distributors to provide AirBar TSMs to our customers, we must analyze the terms of our distributor agreements to determine when control passes from us to our distributors. For sales of AirBar and TSMs sold through distributors, we recognize revenues when our distributors obtain control over our products.
Because we use distributors to provide TSMs to our customers, we must analyze the terms of our distributor agreements to determine when control passes from us to our distributors. For sales of TSMs sold through distributors, we recognize revenues when our distributors obtain control over our products.
The weighted-average number of shares of common stock and potential common stock equivalents used in computing the net loss per share for years ended December 31, 2022 and 2021 exclude the potential common stock equivalents, as the effect would be anti-dilutive.
The weighted-average number of shares of common stock and potential common stock equivalents used in computing the net loss per share for years ended December 31, 2023 and 2022 exclude the potential common stock equivalents, as the effect would be anti-dilutive.
Deferred Revenues Deferred revenues consist primarily of prepayments for license fees, and other products or services that we have been paid in advance. We earn this revenue when we transfer control of the product or service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services.
Contract Liabilities Contract liabilities (deferred revenues) consist primarily of prepayments for license fees, and other products or services that we have been paid in advance. We earn the revenue when we transfer control of the product or service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services.
Since 2010, our licensing customers have sold approximately 90 million devices that use our technology. In October 2017, we augmented our licensing business and began manufacturing and shipping touch sensor modules (“TSMs”) that incorporate our patented technology. We sell these TSMs to OEMs, Original Design Manufacturers (“ODMs”), and systems integrators for use in their products.
Since 2010, our licensing customers have sold approximately 95 million devices that use our technology. In 2017, we augmented our licensing business and began manufacturing and shipping touch sensor modules (“TSMs”) that incorporate our patented technology. We sell these TSMs to OEMs, Original Design Manufacturers (“ODMs”), and systems integrators for use in their products.
Net Loss per Share Net loss per share amounts have been computed based on the weighted-average number of shares of common stock outstanding during the years ended December 31, 2022 and 2021.
Net Loss per Share Net loss per share amounts have been computed based on the weighted-average number of shares of common stock outstanding during the years ended December 31, 2023 and 2022.
We defer license fees until we have met all accounting requirements for revenue recognition, which is when a license is made available to a customer and that customer has a right to use the license. Engineering development fee revenues are deferred until engineering services have been completed and accepted by our customers.
We defer license fees until we have met all accounting requirements for revenue recognition, which is when a license is made available to a customer and that customer has a right to use the license. Non-recurring engineering fee revenues are deferred until engineering services have been completed and accepted by our customers.
See “Non-controlling Interests” below for further discussion. All inter-company accounts and transactions have been eliminated in consolidation. The accounting policies affecting our financial condition and results of operations are more fully described in Note 2 of our consolidated financial statements.
See “Noncontrolling Interests” below for further discussion. All inter-company accounts and transactions have been eliminated in consolidation. The accounting policies affecting our financial condition and results of operations are more fully described in Note 2 of our consolidated financial statements.
The non-controlling interests are reported below net loss including non-controlling interests under the heading “Net loss attributable to non-controlling interests” in the consolidated statements of operations, below comprehensive loss under the heading “Comprehensive loss attributable to non-controlling interests” in the consolidated statements of comprehensive loss, and shown as a separate component of stockholders’ equity in the consolidated balance sheets.
The noncontrolling interests are reported below net loss including noncontrolling interests under the heading “Net loss attributable to noncontrolling interests” in the consolidated statements of operations, below comprehensive loss under the heading “Comprehensive loss attributable to noncontrolling interests” in the consolidated statements of comprehensive loss and shown as a separate component of stockholders’ equity in the consolidated balance sheets.
When determining stock-based compensation expense involving options and warrants, we determine the estimated fair value of options and warrants using the Black-Scholes option pricing model. Non-controlling Interests We recognize any non-controlling interest, also known as a minority interest, as a separate line item in equity in the consolidated financial statements.
When determining stock-based compensation expense involving options and warrants, we determine the estimated fair value of options and warrants using the Black-Scholes option pricing model. Noncontrolling Interests We recognize any noncontrolling interest, also known as a minority interest, as a separate line item in stockholders’ equity in the consolidated financial statements.
A non-controlling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us. Generally, any interest that represents less than 50% of the outstanding voting shares is deemed to be a non-controlling interest; however, there are other factors, such as decision-making rights, that are considered as well.
A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well.
As of December 31, 2022 we had 35 valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers. As of December 31, 2021, that number was 34. During the year ended December 31, 2022, we had 11 customers using our touch technology in products that were being shipped to their customers.
As of December 31, 2023, we had 34 valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers. As of December 31, 2022, that number was 35. During the year ended December 31, 2023, we had 10 customers using our touch technology in products that were being shipped to their customers.
The majority of our license fees earned in 2022 and 2021 were from customer shipments of printers. As of December 31, 2022, we had 10 agreements with value added resellers (“VARs”) for integration of our TSMs in the products they offer to global OEMs, ODMs and systems integrators.
The majority of our license fees earned in 2023 and 2022 were from customer shipments of printers. As of December 31, 2023, we had nine agreements with value added resellers (“VARs”) for integration of our TSMs in the products they offer to global OEMs, ODMs and systems integrators.
Under the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per ASIC for each of the first two million ASICs sold.
Under the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per ASIC for each of the first 2,000,000 ASICs sold.
Our contracts with customers may include combinations of products and services (e.g., a contract that includes products and related engineering services). We structure our contracts such that distinct performance obligations, such as product sales or license fees, and related engineering services, are clearly defined in each contract.
Our contracts with customers may include combinations of products and services (e.g., a contract that includes products and related engineering services). We structure our contracts such that distinct performance obligations, such as product sales or license fees, and related engineering services, are clearly defined in each contract. License fees and sales of our TSMs are on a per-unit basis.
We provide either in the consolidated statement of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the non-controlling interest that separately discloses: (1) Net income or loss; (2) Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and (3) Each component of other comprehensive income or loss.
The Company provides either in the consolidated statement of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the Company, and equity (net assets) attributable to the noncontrolling interest that separately discloses: (1) Net income or loss; (2) Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and (3) Each component of other comprehensive income or loss.
The lease agreement has been extended and is valid through November 2023. It is extended on a yearly basis unless written notice is provided nine months prior to the expiration date. On December 1, 2015, Pronode Technologies AB entered into a lease agreement for 9,040 square feet of workshop located at Faktorvägen 17, Kungsbacka, Sweden.
It is extended on a yearly basis unless written notice is provided nine months prior to the expiration date. On December 1, 2015, Pronode Technologies AB entered into a lease agreement for 9,040 square feet of workshop located at Faktorvägen 17, Kungsbacka, Sweden.
The implicit interest rate of the lease is currently approximately 1.5% per annum. On November 1, 2021 the lease contract was extended for two years. The implicit interest rate of the extended lease period is 1.5% per annum. In 2018, we entered into a lease for component production equipment.
The implicit interest rate of the lease was approximately 1.5% per annum. In November, 2021, the lease contract was extended for two years. The implicit interest rate of the extended lease period was 1.5% per annum. In November, 2023, the equipment was purchased. In 2018, we entered into a lease for component production equipment.
We include the amount of net income (loss) attributable to non-controlling interests in consolidated net income (loss) on the face of the consolidated statements of operations.
We include the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the consolidated statements of operations.
The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was $9,000 and $69,000 as of December 31, 2022 and 2021, respectively. The warranty reserve is recorded as an accrued expense and cost of sales and was $49,000 and $36,000 as of December 31, 2022 and 2021, respectively.
The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was $8,000 and $9,000 as of December 31, 2023 and 2022, respectively. The warranty reserve is recorded as an accrued expense and cost of sales and was $30,000 and $49,000 as of December 31, 2023 and 2022, respectively.
Gains or (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations were $35,000 and $(66,000) during the years ended December 31, 2022 and 2021, respectively.
Foreign currency translation gains (losses) were $(56,000) and $68,000 during the years ended December 31, 2023 and 2022, respectively. Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations were $(5,000) and $35,000 during the years ended December 31, 2023 and 2022.
There is approximately $8,000 of stock-based compensation expense included in sales and marketing expenses for the year ended December 31, 2022 compared to $50,000 for the year ended December 31, 2021.
There is approximately $8,000 of stock-based compensation expense included in sales and marketing expenses for each of the years ended December 31, 2023 and 2022.
For technology license arrangements that do not require significant modification or customization of the underlying technology, we recognize technology license revenue when the license is made available to the customer and the customer has a right to use that license.
The license for our IP has standalone value and can be used by the licensee without maintenance and support. For technology license arrangements that do not require significant modification or customization of the underlying technology, we recognize technology license revenue when the license is made available to the customer and the customer has a right to use that license.
The implicit interest rate of the lease is currently approximately 3.0% per annum. Non-Recurring Engineering Development Costs On April 25, 2013, we entered into an Analog Device Development Agreement (the “NN1002 Agreement”) with Texas Instruments (“TI”), with an effective date of December 6, 2012, pursuant to which TI agreed to integrate our intellectual property into an ASIC.
Non-Recurring Engineering Development Costs On April 25, 2013, we entered into an Analog Device Development Agreement with an effective date of December 6, 2012 (the “NN1002 Agreement”) with Texas Instruments (“TI”) pursuant to which TI agreed to integrate our intellectual property into an Application Specific Integrated Circuit (“ASIC”).
During 2022, our three distributors sold and shipped 4,834 TSMs and related development kits. 15 During 2022 and 2021, we continued to focus our efforts on maintaining our current licensing customers and achieving design wins for new products both with current and future customers.
During 2023, our three distributors sold and shipped approximately 7,400 TSMs and related development kits. 15 During 2023 and 2022, we continued to focus our efforts on maintaining our current licensing customers and achieving design wins for new products both with current and future customers. In parallel we continued to market and sell TSMs directly and indirectly via partners.
Due to the low sell-through of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well as AirBar related raw materials and finished goods. The AirBar inventory reserve was $0.3 million and $0.8 million as of December 31, 2022 and 2021, respectively.
Management has decided to reserve TSM related raw materials which are expected to remain after production ends in 2024. The TSM inventory reserve was $3.6 million as of December 31, 2023. Due to the low sell-through of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well as AirBar related raw materials and finished goods.
Riley Securities, of all of the shares subject to the Sales Agreement and (ii) termination of the Sale Agreement in accordance with its terms. During the twelve months ended December 31, 2022, we sold an aggregate of 886,065 shares of common stock under the ATM Facility, resulting in net proceeds of approximately $4,686,000 after payment of commissions to B.
Riley Securities, of all of the shares subject to the Sales Agreement and (ii) termination of the Sales Agreement in accordance with its terms. During the year ended December 31, 2023, we sold an aggregate of 903,716 shares of our common stock under the ATM Facility with aggregate net proceeds to us of $7,866,000, after payment of commissions to B.
As of December 31, 2022, we had cash of $14.8 million, as compared to $17.4 million as of December 31, 2021. Working capital (current assets less current liabilities) was $19.1 million as of December 31, 2022, compared to working capital of $19.1 million as of December 31, 2021.
Working capital (current assets less current liabilities) was $16.8 million as of December 31, 2023, compared to working capital of $19.1 million as of December 31, 2022.
Net cash used in operating activities for the year ended December 31, 2022 was $6.8 million and was primarily the result of a net loss including noncontrolling interests of approximately $5.3 million. Cash used to fund net losses is offset by approximately $0.6 million in non-cash operating expenses, mainly comprised of depreciation, amortization and stock-based compensation.
Net cash used in operating activities for the year ended December 31, 2022 was $6.8 million and was primarily the result of a net loss including noncontrolling interests of $5.3 million and approximately $0.6 million in non-cash operating expenses, comprised of stock-based compensation expense, depreciation and amortization and amortization of operating lease right-of-use assets and recoveries of bad debt, and changes in operating assets and liabilities of $(2.1) million.
Riley Securities and other expenses of $167,000. During the twelve months ended December 31, 2021, we sold an aggregate of 235,722 shares of common stock under the ATM Facility, resulting in net proceeds of approximately $1,984,000 after payment of commissions to B. Riley Securities and other expenses of $66,000.
Riley Securities and other expenses of $244,000. During the year ended December 31, 2022, we sold an aggregate of 886,065 shares of common stock under the ATM Facility, resulting in net proceeds of approximately $4,686,000 after payment of commissions to B.
(4,883 ) (6,450 ) 1,567 (24.3 )% Percentage of revenue (86.1 )% (110.5 )% Net loss per share attributable to Neonode Inc. per share $ (0.36 ) $ (0.54 ) $ 0.18 (33.3 )% 20 Revenues All of our sales for the years ended December 31, 2022 and 2021 were to customers located in the United States, Europe and Asia.
(10,123 ) (4,883 ) (5,240 ) 107.3 % Percentage of revenue (227.5 )% (86.1 )% Net loss per share attributable to Neonode Inc. per share $ (0.66 ) $ (0.36 ) $ (0.30 ) 83.3 % 20 Revenues All of our sales for the years ended December 31, 2023 were to customers located in the United States, Europe, Asia and Oceania.
The other income for 2022 was related to interest income earned and gain from recovery of bad debt offset by primarily finance leases. The other expense for 2021 was primarily related to finance leases.
Other Income Other income for the year ended December 31, 2023 was $736,000 compared to $121,000 for the year ended December 31, 2022. The other income for 2023 was mainly related to interest income earned. The other income for 2022 was related to interest income earned and gain from recovery of bad debt offset by primarily finance leases.
At December 31, 2021, the guaranteed amount was decreased from $100,000 to $0. We do not have any other transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources other than the operating leases incurred in the normal course of business.
Contractual Obligation and Off-Balance Sheet Arrangements We do not have any transactions, arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources other than the operating leases incurred in the normal course of business.
Operating Leases We did not renew our lease for the office space located at 2880 Zanker Road, San Jose, California 95134 in August 2020 and Neonode Inc. now operates solely through a virtual office in California. 23 On December 1, 2020, Neonode Technologies AB entered into a lease for 6,684 square feet of office space located at Karlavägen 100, Stockholm, Sweden.
Operating Leases Neonode Inc. operates solely through a virtual office in California. 23 On December 1, 2020, Neonode Technologies AB entered into a lease for 6,684 square feet of office space located at Karlavägen 100, Stockholm, Sweden. The lease agreement has been extended and is valid through November 2024.
We made investments enhancing the design and improving the production yield of our TSMs and improving the related firmware and configuration tools software platforms. We also made investments to expand our partner networks for sales and distribution of TSMs.
We made investments enhancing the design and improving the production yield of our TSMs and improving the related firmware and configuration tools software platforms. We also made investments to expand our partner networks for sales and distribution of TSMs. On December 12, 2023, the Company announced a new, sharpened strategy with full focus on the licensing business.
We recorded valuation allowances in 2022 and 2021 for deferred tax assets related to net operating losses due to the uncertainty of realization.
Income Taxes Our effective tax rate was (1.1)% for the year ended December 31, 2023 and (2.3)% for the year ended December 31, 2022. We recorded valuation allowances in 2023 and 2022 for deferred tax assets related to net operating losses due to the uncertainty of realization.
Inventory Our inventory consists primarily of components that will be used in the manufacturing of our TSMs. We classify inventory for reporting purposes as raw materials, work-in-process, and finished goods. Inventory is stated at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method.
We classify inventory for reporting purposes as raw materials, work-in-process, and finished goods. Inventory is stated at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
There is approximately $114,000 of non-cash stock-based compensation included in G&A expenses for the year ended December 31, 2022 compared to $107,000 for the year ended December 31, 2021. Other Income (Expense) Other income (expense) for the year ended December 31, 2022 was $121,000 compared to $(15,000) for the year ended December 31, 2021.
The increase of 5.0% from 2022 was primarily due to higher cost for professional fees. There is approximately $50,000 of non-cash stock-based compensation included in G&A expenses for the year ended December 31, 2023 compared to $114,000 for the year ended December 31, 2022.
The following tables present the net revenues distribution by geographical area and revenue stream for the years ended December 31, 2022 and 2021 (dollars in thousands): 2022 2021 Amount Percentage Amount Percentage AMER License fees $ 1,812 98.5 % $ 2,102 93.6 % Products 27 1.5 % 144 6.4 % Non-recurring engineering - - % - - % $ 1,839 100.0 % $ 2,246 100.0 % APAC License fees $ 2,369 85.7 % $ 2,394 77.2 % Products 348 12.6 % 661 21.3 % Non-recurring engineering 46 1.7 % 48 1.5 % $ 2,763 100.0 % $ 3,103 100.0 % EMEA License fees $ 289 27.1 % $ 291 59.8 % Products 620 58.0 % 150 30.8 % Non-recurring engineering 159 14.9 % 46 9.4 % $ 1,068 100.0 % $ 487 100.0 % 21 The following table presents disaggregated revenues by revenue stream for the years ended December 31, 2022 and 2021 (dollars in thousands): Year ended December 31, 2022 Year ended December 31, 2021 Amount Percentage Amount Percentage Net license revenues from automotive (license fees) $ 1,551 27.4 % $ 1,602 27.5 % Net license revenues from consumer electronics (license fees) 2,919 51.5 % 3,185 54.5 % Net revenues from TSMs (products) 995 17.5 % 955 16.4 % Net revenues from non-recurring engineering services 205 3.6 % 94 1.6 % $ 5,670 100.0 % $ 5,836 100.0 % License fees decreased by 6.6% in 2022 as compared to 2021.
The following tables present the net revenues distribution by geographical area and revenue stream for the years ended December 31, 2023 and 2022 (dollars in thousands): 2023 2022 Amount Percentage Amount Percentage North America License fees $ 1,455 90.9 % $ 1,812 98.5 % Products 145 9.1 % 27 1.5 % Non-recurring engineering - - % - - % $ 1,600 100.0 % $ 1,839 100.0 % Asia Pacific License fees $ 1,988 94.7 % $ 2,369 85.7 % Products 105 5.0 % 348 12.6 % Non-recurring engineering 7 0.3 % 46 1.7 % $ 2,100 100.0 % $ 2,763 100.0 % Europe, Middle East and Africa License fees $ 360 48.1 % $ 289 27.1 % Products 370 49.4 % 620 58.0 % Non-recurring engineering 19 2.5 % 159 14.9 % $ 749 100.0 % $ 1,068 100.0 % 21 The following table presents disaggregated revenues by revenue stream for the years ended December 31, 2023 and 2022 (dollars in thousands): Year ended December 31, 2023 Year ended December 31, 2022 Amount Percentage Amount Percentage Net license revenues from automotive $ 1,559 35.1 % $ 1,551 27.4 % Net license revenues from consumer electronics 2,244 50.4 % 2,919 51.5 % Net product revenues from TSMs 620 13.9 % 995 17.5 % Net non-recurring engineering services revenues 26 0.6 % 205 3.6 % $ 4,449 100.0 % $ 5,670 100.0 % Revenues from license fees were $3.8 million and $4.5 million for the years ended December 31, 2023 and 2022, respectively.
License fees We earn revenue from licensing our internally developed intellectual property (“IP”). We enter into IP licensing agreements that generally provide licensees the right to incorporate our IP components into their products, with terms and conditions that vary by licensee.
We enter into IP licensing agreements that generally provide licensees the right to incorporate our IP components into their products, with terms and conditions that vary by licensee. Fees under these agreements may include license fees relating to our IP, and royalties payable to us following the distribution by our licensees of products incorporating the licensed technology.
Net Loss As a result of the factors discussed above, we recorded a net loss of $4.9 million for the year ended December 31, 2022, compared to a net loss of $6.5 million for the year ended December 31, 2021. Contractual Obligation We previously agreed to secure the value of inventory purchased by one of our AirBars manufacturing partners.
Net Loss As a result of the factors discussed above, we recorded a net loss of $10.1 million for the year ended December 31, 2023, compared to a net loss of $4.9 million for the year ended December 31, 2022.
Our sales activities focus on OEM, ODM and Tier 1 customers, directly or through VARs, who license our technology or purchase and embed our touch sensor modules into their products. 22 General and Administrative General and administrative (“G&A”) expenses were 73.3% of revenue in 2022 compared to 96.0% in 2021.
Our sales and marketing activities focus on OEM, ODM and Tier 1 customers who will license our technology or purchase and embed our TSMs into their products. 22 General and Administrative General and administrative (“G&A”) expenses for 2023 and 2022 were $4.4 million and $4.2 million, respectively.
Under the terms of the agreement, the lease will be renewed within one year of the original three-year lease term. In accordance with relevant accounting guidance the lease is classified as a finance lease. The lease payments and depreciation periods began in May 2022 when the equipment went into service.
The implicit interest rate of the lease is currently approximately 1.5% per annum. In 2022, we entered into a lease for soundproof office pods. Under the terms of the agreement, the lease will be renewed within one year of the original three-year lease term. In accordance with relevant accounting guidance the lease is classified as a finance lease.
Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Neonode Inc. and its wholly owned subsidiaries, as well as Pronode Technologies AB (Sweden), wholly owned subsidiary of Neonode Technologies AB, one of our wholly owned subsidiaries.
GAAP”) and include the accounts of Neonode Inc. and its wholly owned subsidiaries, as well as Pronode Technologies AB (Sweden), wholly owned subsidiary of Neonode Technologies AB, one of our wholly owned subsidiaries.
License fees and sales of our AirBars and TSMs are on a per-unit basis. Therefore, we generally satisfy performance obligations as units are shipped to our customers. Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by our customers.
Therefore, we generally satisfy performance obligations as units are shipped to our customers. Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by our customers. We recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.
We recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. We treat all product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise to transfer goods. Therefore, we treat all shipping and handling charges as expenses.
We treat all product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise to transfer goods. Therefore, we treat all shipping and handling charges as expenses. License fees We earn revenue from licensing our internally developed intellectual property (“IP”).
Net cash provided by financing activities for the year ended December 31, 2021 was $14.6 million and was mainly the result of the issuance of common stock, partly offset by principal payments on finance leases. For the year ended December 31, 2022, we purchased $52,000 of fixed assets, consisting primarily of office equipment.
Net cash provided by financing activities for the year ended December 31, 2022 was $4.5 million and was mainly the result of the issuance of common stock, partly offset by principal payments on finance leases. At-the-Market Offering Program On May 10, 2021, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. (“B.
R&D costs consist mainly of personnel related costs in addition to some external consultancy costs such as testing, certifying and measurements.
R&D expenses primarily consist of personnel-related costs in addition to external consultancy costs, such as testing, certifying and measurements, along with costs related to developing and building new product prototypes. The decrease of 3.3% in 2023 compared to 2022 was primarily related to lower product development costs.
During the years ended December 31, 2022 and December 31, 2021, we recorded no losses. Accounts Receivable and Allowance for Doubtful Accounts Our accounts receivable is stated at net realizable value. Our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make the required payments.
During the years ended December 31, 2023 and 2022, we recorded no losses. Accounts Receivable and Credit Losses Accounts receivable is stated at net realizable value. We estimate and record a provision for expected credit losses related to our financial instruments, including our trade receivables.
The decrease in total gross revenues by 2.8% for the year ended December 31, 2022 as compared to 2021 was primarily caused by lower license fees, offset by higher product sales and NRE.
The decrease in total net revenues by 21.5% for the year ended December 31, 2023 as compared to 2022 was caused by lower revenues from all three revenue streams.
Management decided to reserve for TSM inventory related to a quality issue in production. The TSM inventory reserve was $0.2 million as of December 31, 2021. During 2022 the affected inventory was scrapped and as of December 31, 2022 the inventory reserve was zero. Research and Development Research and development (“R&D”) costs are expensed as incurred.
The AirBar inventory reserve was $0.3 million as of December 31, 2022. In 2023, management decided to scrap the fully reserved AirBar inventory. Research and Development Research and development (“R&D”) costs are expensed as incurred. R&D costs consist mainly of personnel-related costs in addition to some external consultancy costs such as testing, certifying and measurements.
Cash used to fund net losses is offset by approximately $1.3 million in non-cash operating expenses, mainly comprised of depreciation, amortization and stock-based compensation. 25 Net cash provided by financing activities for the year ended December 31, 2022 was $4.5 million and was mainly the result of the issuance of common stock, partly offset by principal payments on finance leases.
Net cash used in operating activities for the year ended December 31, 2023 was $6.3 million and was primarily the result of a net loss of $10.1 million and approximately $3.8 million in non-cash operating expenses, comprised of stock-based compensation expense, inventory impairment loss, depreciation and amortization and amortization of operating lease right-of-use assets, and changes in operating assets and liabilities of $25,000.
Accounts receivable and unbilled revenues increased by approximately $136,000 as of December 31, 2022 compared to December 31, 2021. Inventory increased by approximately $1,133,000 as of December 31, 2022 compared to December 31, 2021. Accounts payable and accrued expenses decreased approximately $460,000 as of December 31, 2022 compared to December 31, 2021.
Accounts receivable and unbilled revenues decreased by approximately $539,000 as of December 31, 2023 compared to December 31, 2022, due to lower revenues. Inventory increased by approximately $395,000 as of December 31, 2023, not considering the $3.6 million non-cash impairment charge recorded during 2023, compared to December 31, 2022.
For the year ended December 31, 2021, we purchased $67,000 of fixed assets, consisting primarily of engineering equipment.
Accounts payable and accrued expenses increased approximately $173,000 as of December 31, 2023 compared to December 31, 2022. 25 For the year ended December 31, 2023, we purchased $123,000 of fixed assets, consisting primarily of manufacturing equipment. For the year ended December 31, 2022, we purchased $52,000 of fixed assets, consisting primarily of office equipment.
The lease payments and depreciation period began on July 1, 2014 when the equipment went into service. On July 1, 2020 the lease contract was extended for one year. The implicit interest rate of the extended lease period is 9.85% per annum. The lease expired July 1, 2021 and we paid the residual value.
The lease payments and depreciation periods began in May 2022 when the equipment went into service. The implicit interest rate of the lease is currently approximately 3.0% per annum.
Our cost of revenues includes the direct cost of production of certain customer prototypes, costs of engineering personnel, engineering consultants to complete the engineering design contracts and cost of goods sold for sensor modules includes fully burdened manufacturing costs, outsourced final assembly costs, and component costs of sensor modules.
The gross margin for products for the year ended December 31, 2022 was impacted by a one-time cost of $262,000 related to inventory write-down. Our cost of revenues includes the direct cost of production of certain customer prototypes, costs of engineering personnel, engineering consultants to complete the engineering design contracts.
Net cash used in operating activities for the year ended December 31, 2021 was $7.7 million and was primarily the result of a net loss including noncontrolling interests of approximately $7.3 million.
Net cash provided by financing activities for the year ended December 31, 2023 was $7.8 million and was primarily the result of issuance of common stock under the ATM Facility (as defined and described below).
Removed
We intend to continue expanding our TSM product offerings in 2023 and beyond, including new TSM variants and new sensor products for delivery to our key markets. We expect that over time the sales of HMI products and Remote Sensing Solutions may constitute the majority of our revenue.
Added
Consequently, we will phase out the TSM product business during 2024 through licensing of the TSM technology to strategic partners or outsourcing. Critical Accounting Policies and Estimates Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
Removed
Fees under these agreements may include license fees relating to our IP, and royalties payable to us following the distribution by our licensees of products incorporating the licensed technology. The license for our IP has standalone value and can be used by the licensee without maintenance and support.
Added
We consider historical collection rates, the current financial status of our customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses.
Removed
The timing of revenue recognition related to AirBar modules depends upon how each sale is transacted - either point-of-sale or through distributors. We recognize revenue for AirBar modules sold point-of-sale (online sales and other direct sales to customers) when we provide the promised product to the customer.
Added
However, because of the short time to the expected receipt of accounts receivable, we believe that the carrying value, net of expected losses, approximates fair value and therefore, we rely more on historical and current analysis of such financial instruments, including our trade receivables.
Removed
Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.
Added
Further, we consider macroeconomic factors and the status of the technology industry to estimate if there are current expected credit losses within our trade receivables based on the trends and our expectation of the future status of such economic and industry-specific factors.
Removed
We defer sensor modules revenues until distributors sell the products to their end customers.
Added
Also, specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default. The accounts receivable balance on our consolidated balance sheet as of December 31, 2023 was $0.9 million, net of approximately $30,000 of allowances.
Removed
The decrease is primarily the result of component shortages within the printer and automotive markets related to the COVID-19 pandemic, which in turn impacted our license revenues for 2022. However, we saw a recovery of license revenues for the second half of 2022 compared to the same period in 2021.
Added
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected at December 31, 2023: Balance at January 1, 2023 $ 30,000 Change in expected credit losses - Write-offs, net of recoveries - Balance at December 31, 2023 $ 30,000 Inventory The Company’s inventory consists primarily of components that will be used in the manufacturing of our TSMs.
Removed
Revenues from product sales were $1.0 million, the same as for 2021. We saw a recovery for the second half of 2022 compared to same period in 2021, but our product sales continue to be negatively impacted by COVID-19 driven lock-downs in Asia.

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