What changed in this filing

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Item 1A. Risk Factors

2021-03-10 compared with 2020-03-11 · 160 added, 186 removed, 286 unchanged (55% of the section changed)

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Our license revenues for the year ended

December 31, 2019 were earned from sixteen OEM, ODM and Tier 1 customers.

We earned NRE revenues from three customers for the

year ended December 31, 2019.

During the year ended December 31, 2019, three customers represented approximately 72% of our consolidated

December 31, 2020 were earned from fourteen OEM, ODM and Tier 1 customers.

We earned NRE revenues from six customers for the year

ended December 31, 2020.

During the year ended December 31, 2020, four customers represented approximately 62% of our consolidated

net revenues.

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to design, manufacture and sell their products that incorporate our touch technology.

We historically generated revenue through

technology licensing agreements with companies that must design, manufacture and sell their products incorporating our touch technology.

The majority of our license fees earned in 2019 and 2018 were from customer shipments of printer products and automotive infotainment

Although we have broadened our business model to selling sensors in addition to licensing our technology, we expect to

continue to receive licensing revenue from current and new customers who have products in their development cycle.

We have historically generated revenue through technology licensing

agreements with companies that design, manufacture and sell their products incorporating our touch technology.

of our license fees earned in 2020 and 2019 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 receive licensing revenue from current and new customers whose products are still in the development cycle.

If our customers

are not able to design, manufacture or sell their products, or are delayed in producing their products, our revenues, profitability,

and liquidity, as well as our brand image, may be adversely affected.

The length of a customer’s product

development and release cycle depends on many factors outside of our control and could cause us to incur significant expenses without

offsetting revenues, or revenues that vary significantly from quarter to quarter.

The development and release cycle for customer

products is lengthy and unpredictable.

Our customers often undertake significant evaluation and design in the qualification of

our products, which contributes to a lengthy product release cycle.

The typical product development and release cycle is eighteen

to sixty months.

The development and release cycle may be longer in some cases, particularly for automotive vehicle products.

is no assurance that a customer will adopt our technology after the evaluation or design phase.

The lengthy and variable development

and release cycle for products may also have a negative impact on the timing of our revenues, causing our revenues and results

of operations to vary significantly from quarter to quarter.

are not able to design, manufacture and sell their products, or are delayed in producing and selling their products, our revenues,

profitability, and liquidity, as well as our brand image, may be adversely affected.

The length of a customer’s

product development and release cycle depends on many factors outside of our control and could cause us to incur significant expenses

without offsetting revenues, or revenues that vary significantly from quarter to quarter.

The development and release cycle for customer products is lengthy

and unpredictable.

Our customers often undertake significant evaluation and design in the qualification of our products, which

contributes to a lengthy product release cycle.

The typical product development and release cycle is 18 to 60 months.

The development

and release cycle may be longer in some cases, particularly for automotive vehicle products.

There is no assurance that a customer

will adopt our technology after the evaluation or design phase.

The lengthy and variable development and release cycle for products

may also have a negative impact on the timing of our revenues, causing our revenues and results of operations to vary significantly

from quarter to quarter.

We and our license customers rely

upon component suppliers to sell products containing our technology and limited availability of components, including due to coronavirus,

may adversely affect our and our customers’

Under our licensing model, OEMs, ODMs

and Tier 1 suppliers manufacture or contract to manufacture products including Neonode ASICs and suitable microcontrollers

containing our touch technology.

The ASICs as well as the microcontrollers are sourced by our customers from Texas

Instruments and/or ST Microelectronics.

As part of their product development process, our customers must qualify these

components for use in the products, thus making the components difficult to replace.

Under our sensor model, we use similar

components supplied by Texas Instruments or ST Microelectronics in our module products.

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.

Global events such as the corona-virus

COVID-19 outbreak emanating from China at the beginning of 2020 that has resulted in extended shutdown of certain businesses

in the region may result in delays in the supply of components.

A shortage of supply may cause delays or the cost of

components to increase and harm our and customers’

ability to manufacture and sell products on a cost-effective basis.

The dependence on third parties to supply core components with our touch technology exposes us to a number of risks including

their inability to obtain an adequate supply of components, the failure to meet our customer requirements, or their failure

to remain in business or adjust to market conditions.

If we and our customers are unable to obtain ASICs and microcontrollers

with our touch 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.

upon component suppliers to 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’

Under our licensing model, OEMs, ODMs and

Tier 1 suppliers manufacture or contract to manufacture products including Neonode ASICs and suitable microcontrollers containing

our touch technology.

The ASICs and the microcontrollers are both sourced by our customers from Texas Instruments and/or ST Microelectronics.

As part of their product development process, our customers must qualify these components for use in the products, thus making

the components difficult to replace.

Under our sensor model, we use similar components supplied by Texas Instruments or ST Microelectronics

in our module products.

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

Our dependence on third parties to supply

core components with our touch technology exposes us to a number of risks including the risk that these suppliers will not be able

to obtain an adequate supply of components, the risk that these suppliers will not be able to meet our customer requirements, and

the risk that these suppliers will be able to remain in business or adjust to market conditions.

If we and our customers are unable

to obtain ASICs and microcontrollers with our touch 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.

The COVID-19 pandemic emanating from China

at the beginning of 2020 has resulted in extended shutdown of businesses all over the world causing general delays in the supply

of components.

We have not suffered of supply shortage, but it is possible that the shortage of supply has caused delays and/or

increased cost of components and thereby harm to our customers’

ability to manufacture and sell products on a cost-effective

It can be difficult for us to verify

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products and our entry into the hardware market may not be successful.

Our business model has focused on licensing

touch technology.

Our business model has historically focused on licensing touch

In recent years, we began to manufacture and sell sensor touch components.

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have an immediate adverse effect on our business, results of operations and financial condition.

In addition, we are subject to the following factors, among

others, that may negatively affect and cause fluctuations in our operating results:

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;

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economic conditions specific to the touchscreen industry;

general economic conditions including the spread of the corona-virus

(COVID-19) and its potential adverse impact on our global sales.

general economic conditions including as a result

of the ongoing COVID-19 pandemic.

Further, as a strategic response to changes

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We may make acquisitions and strategic

investments that are dilutive to existing stockholders, resulting in unanticipated accounting charges or otherwise adversely affect

investments that are dilutive to existing stockholders, result in unanticipated accounting charges or otherwise adversely affect

our results of operations.

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any future acquisitions, we could issue stock that would dilute our stockholders’

percentage ownership, or we may incur

substantial debt, reduce our cash reserves and/or assume contingent liabilities.

Further, acquisitions and strategic investments

may result in material charges, adverse tax consequences, substantial depreciation, deferred compensation charges, in-process

research and development charges, and the amortization of amounts related to deferred compensation and identifiable purchased

intangible assets or impairment of goodwill.

percentage ownership, or we may incur substantial

debt, reduce our cash reserves and/or assume contingent liabilities.

Further, acquisitions and strategic investments may result

in material charges, adverse tax consequences, substantial depreciation, deferred compensation charges, in-process research and

development charges, and the amortization of amounts related to deferred compensation and identifiable purchased intangible assets

or impairment of goodwill.

Any of these could negatively impact our results of operations.

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of our key personnel.

Our senior management team consists of

two executive officers, the Chief Executive Officer and the Chief Financial Officer.

On June 1, 2019, Maria Ek became our new

Chief Financial Officer.

Our senior management team consists of two

executive officers, the Chief Executive Officer and the Chief Financial Officer.

On June 1, 2019, Maria Ek became our new Chief

Financial Officer.

On January 1, 2020, Urban Forssell became our new Chief Executive Officer.

Changes in our management

and the unplanned loss of the services of any member of management could have a materially adverse effect on our operations and

future prospects.

Changes in our management and the

unplanned loss of the services of any member of management could have a materially adverse effect on our operations and future

Our revenues and growth are dependent

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Our pending patent applications for registration may not be allowed, or others may challenge the validity or scope of our patents.

Even if our patents registrations are issued and maintained, these patents may not be of adequate scope or benefit to us or may

Even if our patent registrations are issued and maintained, these patents may not be of adequate scope or benefit to us or may

be held invalid and unenforceable against third parties.

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2019, we assigned a portfolio of certain patents to Aequitas Technologies LLC to license or otherwise monetize those patents.

If in the future we may enter into additional alternative patent monetization strategies, including the sale of patents.

In the future we may enter into additional alternative patent monetization strategies, including the sale of patents.

monetization strategies may negatively impact our financial condition, revenue and results of operations.

No assurance can be

given that we will enter into agreements related to our patent portfolio or that we will be successful in any strategic efforts

around patent monetization.

No assurance can be given

that we will enter into agreements related to our patent portfolio or that we will be successful in any strategic efforts around

patent monetization.

If third parties infringe upon our

intellectual property, we may expend significant resources enforcing our rights or suffer competitive injury.

Existing laws, contractual provisions and

remedies afford only limited protection for our intellectual property.

We may be required to spend significant resources to monitor

and police our intellectual property rights.

Effective policing of the unauthorized use of our technology or intellectual property

is difficult and litigation may be necessary in the future to enforce our intellectual property rights.

Intellectual property litigation

is not only expensive, but time-consuming, regardless of the merits of any claim, and could divert attention of our management

from operating the business.

Intellectual property lawsuits are subject to inherent uncertainties due to, among other things, the

complexity of the technical issues involved, and we cannot assure you that we will be successful in asserting our intellectual

Existing laws, contractual provisions and remedies afford only

limited protection for our intellectual property.

We may be required to spend significant resources to monitor and police our intellectual

property rights.

Attempts may be made to copy or reverse engineer aspects of our technology or to obtain and use information that

we regard as proprietary.

We may not be able to detect infringement and may lose competitive position in the market before they

In addition, competitors may design around our technology or develop competing technologies.

We cannot assure you that we

will be able to protect our proprietary rights against unauthorized third party copying or use.

The unauthorized use of our technology

or of our proprietary information by competitors could have an adverse effect on our ability to sell our technology.

Effective policing of the unauthorized use of our technology or intellectual property is difficult and litigation

may be necessary in the future to enforce our intellectual property rights.

Intellectual property litigation is not only expensive,

but time-consuming, regardless of the merits of any claim, and could divert attention of our management from operating the business.

Intellectual property lawsuits are subject to inherent uncertainties due to, among other things, the complexity of the technical

issues involved, and we cannot assure you that we will be successful in asserting our intellectual property rights.

be made to copy or reverse engineer aspects of our technology or to obtain and use information that we regard as proprietary.

may not be able to detect infringement and may lose competitive position in the market as a result.

In addition, competitors may

design around our technology or develop competing technologies.

We cannot assure you that we will be able to protect our proprietary

rights against unauthorized third party copying or use.

The unauthorized use of our technology or of our proprietary information

by competitors could have an adverse effect on our ability to sell our technology.

The laws of foreign countries may

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in countries and must manage currency risks.

A significant portion of our business is

conducted in currencies other than the U.S.

dollar (the currency in which our consolidated financial statements are reported),

primarily the Swedish Krona and, to a lesser extent, the Euro, Japanese Yen, Korean Won and Taiwan Dollars.

For the year ended

December 31, 2019, our revenues from North America, Asia, and Europe were 48%, 38%, and 13% 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.

As a result, appreciation of the value of the Swedish Krona relative to the

other currencies, particularly the U.S.

dollar, could adversely affect operating results.

We do not currently undertake hedging

transactions to cover our currency exposure, but we may choose to hedge a portion of our currency exposure in the future as it

deems appropriate.

A significant portion of our business is conducted in currencies

other than the U.S.

dollar (the currency in which our consolidated financial statements are reported), primarily the Swedish Krona

and, to a lesser extent, the Euro, Japanese Yen, Korean Won and Taiwan Dollars.

For the year ended December 31, 2020, our revenues

from Asia, North America and Europe were 48%, 42%, and 10%, 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

As a result, appreciation of the value of the Swedish Krona relative to the other currencies, particularly the U.S.

could adversely affect operating results.

We do not currently undertake hedging transactions to cover our currency exposure, but

we may choose to hedge a portion of our currency exposure in the future as we deem appropriate.

Security breaches and other disruptions

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and proprietary information could experience a cybersecurity incident.

We rely on third parties to provide or maintain

some of our information technology and related services.

We rely on third parties to provide or maintain some of our

information technology and related services.

We do not exercise direct control over these systems.

Despite the implementation

of security measures at third party locations, these services are also vulnerable to security breaches or other disruptions.

Despite the implementation of

security measures at third party locations, these services are also vulnerable to security breaches or other disruptions.

assurances from third parties to protect this information and, where we believe appropriate, our monitoring of the protections

employed by these third parties, there is a risk the confidentiality of data held by us or by third parties may be compromised

and expose us to liability for such breach.

If we are unable to detect material

weaknesses in our internal control, our financial reporting and our Company may be adversely affected.

employed by these third parties, there is a risk that the confidentiality of the data held by these third parties on our behalf

may be compromised and expose us to liability for any security breach or disruption.

If we are unable to detect material weaknesses in our internal

control, our financial reporting and our business may be adversely affected.

Section 404 of the Sarbanes-Oxley Act of

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Risks Related to Owning Our Stock

Future sales of our common stock

by us could adversely affect its price, and our future capital-raising activities could involve the issuance of equity securities,

which would dilute your investment and could result in a decline in the trading price of our common stock.

Our long-term success is dependent on us

obtaining sufficient capital to fund our operations and to develop our touch technology and bringing our technology to the worldwide

market to obtain sufficient sales volume to be profitable.

We may sell securities in the public or private equity markets if and

when conditions are favorable, even if we do not have an immediate need for additional capital at that time.

Sales of substantial

amounts of common stock, or the perception that such sales could occur, could adversely affect the prevailing market price of our

common stock and our ability to raise capital.

We may issue additional common stock in future financing transactions or as incentive

compensation for our executive management and other key personnel, consultants and advisors.

Issuing any equity securities would

be dilutive to the equity interests represented by our then-outstanding shares of common stock.

The market price for our common

stock could decrease as the market takes into account the dilutive effect of any of these issuances.

Furthermore, we may enter

into financing transactions at prices that represent a substantial discount to the market price of our common stock.

reaction by investors and securities analysts to any discounted sale of our equity securities could result in a decline in the

trading price of our common stock.

We currently have fewer than 300 stockholders

of record and, therefore, are eligible to terminate the registration of our common stock under the Exchange Act and cease being

public company.

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 March 2, 2020, there were approximately

150 stockholders of record of our common stock as determined by counting our record holders and the number of participants reflected

in a security position listing provided to us by the Depository Trust Company.

Accordingly, we are eligible to deregister our

common stock under the Exchange Act.

Upon the effectiveness of the termination of registration under Section 12 and the applicability

of other provisions of the U.S.

federal securities law, we would not be required to comply with certain U.S.

public company disclosure

requirements under the Exchange Act, including, but not limited to, annual and quarterly report filings, proxy statement filings

and filings by insiders to disclose the acquisition and disposition of our securities.

If our common stock is delisted from

the Nasdaq Stock Market, our business, financial condition, results of operations and stock price could be adversely affected,

and the liquidity of our stock and our ability to obtain financing could be impaired.

On December 27, 2017, we received a notice from the Nasdaq Stock

Market indicating that, for 30 consecutive days, the bid price for our common stock had closed below the minimum $1.00 per share

requirement for continued listing on the Nasdaq Stock Market.

Although we regained compliance, there can be no assurance that we

will be able to elect or maintain our listing on the Nasdaq Stock Market.

Any delisting of our common stock from

the Nasdaq Stock Market could adversely affect our ability to attract new investors, decrease the liquidity of our outstanding

shares of common stock, reduce our flexibility to raise additional capital, reduce the price at which our common stock trades,

and increase the transaction costs inherent in trading such shares.

Future sales of our common stock by us or our insiders could

adversely affect the trading price of our common stock and dilute your investment.

Our long-term success is dependent on us obtaining sufficient

capital to fund our operations and to develop our touch technology and bringing our technology to the worldwide market to obtain

sufficient sales volume to be profitable.

We may sell securities in the public or private equity markets if and when conditions

are favorable, even if we do not have an immediate need for additional capital at that time.

We may also issue additional common

stock in future financing transactions or as incentive compensation for our executive management and other key personnel, consultants

and advisors.

Sales of substantial amounts of common stock by us or by our

insiders or large stockholders, or the perception that such sales could occur, could adversely affect the prevailing market price

of our common stock and our ability to raise capital.

Issuing equity securities would also be dilutive to the equity interests

represented by our then-outstanding shares of common stock.

The market price for our common stock could decrease as the market

takes into account the dilutive effect of any of these issuances.

Furthermore, we may enter into financing transactions at prices

that represent a substantial discount to the market price of our common stock.

A negative reaction by investors and securities

analysts to any discounted sale of our equity securities could result in a decline in the trading price of our common stock.

We currently have fewer than 300 stockholders of record

and, therefore, are eligible to terminate the registration of our common stock under the Exchange Act and cease being a U.S.

company with reporting obligations.

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 18, 2021, there were 62 stockholders of record of

our common stock.

This does not include the number of shareholders that hold shares in “street name”

through banks,

brokers and other financial institutions Accordingly, we are eligible to deregister our common stock and suspend our

reporting obligations under the Exchange Act.

If we were to terminate our registration and suspend our reporting obligations under

the Exchange Act, we would no longer be required to comply with U.S.

public company disclosure requirements under the Exchange

Act, including, but not limited to, annual and quarterly report filings, proxy statement filings and filings by insiders to disclose

the acquisition and disposition of our securities.

The listing of our common stock on

the Nasdaq Stockholm may adversely affect the liquidity and trading prices for our common stock.

Our Board of Directors has announced it

is evaluating whether to list our common stock on the Nasdaq Stockholm.

There is no assurance that our common stock will be listed

on the Nasdaq Stockholm, or that if listed, an active market for trading there will develop.

Although we believe a significant

number of our stockholders already are located in Sweden, a listing on the Nasdaq Stockholm may cause changes in the composition

of our stockholder base and our Company’s future direction.

Any listing on the Nasdaq Stockholm may adversely affect liquidity

and trading prices for our common stock on the Nasdaq Stockholm or the Nasdaq Stock Market or both.

Our Board of Directors has announced that it is evaluating whether

to list our common stock on the Nasdaq Stockholm.

There is no assurance that our common stock will be listed on the Nasdaq Stockholm,

or that if listed, an active market for trading there will develop.

Although we believe a significant number of our stockholders

are already located in Sweden, a listing on the Nasdaq Stockholm may cause changes in the composition of our stockholder base and

our future direction.

Any listing on the Nasdaq Stockholm may adversely affect liquidity and the trading prices for our common

stock on the Nasdaq Stock Market.

Our stock price has been volatile,

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changes in stock market analyst recommendations or earnings estimates regarding our common stock, other comparable companies, or our industry generally.

Future sales of our common stock

by insiders could negatively affect our stock price.

Two members of our Board of Directors each

beneficially own approximately 18% of the shares of our common stock.

Sales of a substantial number of shares of our common stock

in the public market by insiders or large stockholders, or the perception that these sales might occur, could depress the market

price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

A limited number of stockholders,

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not control these analysts or other third parties.

The price of our common stock could be negatively impacted by insufficient

analyst coverage or if one or more analysts or other third parties publish inaccurate or unfavorable research about us.

The price of our common stock could be negatively impacted by insufficient analyst

coverage or if one or more analysts or other third parties publish inaccurate or unfavorable research about us.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors