þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the fiscal year ended December 31, 2011 | |
or
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o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from ________ to _________ |
Delaware
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94-1517641
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(State or Other Jurisdiction of
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(I.R.S. Employer
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Incorporation or Organization)
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Identification Number)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.001 per share
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NONE
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Large accelerated filer
¨
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
ý
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PART I
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||
Item 1.
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BUSINESS
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4
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Item 1A.
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RISK FACTORS
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13
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Item 1B.
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UNRESOLVED STAFF COMMENTS
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19
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Item 2.
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PROPERTIES
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19
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Item 3.
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LEGAL PROCEEDINGS
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19
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Item 4.
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MINE SAFETY DISCLOSURES
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19
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PART II
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||
Item 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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20
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Item 6.
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SELECTED FINANCIAL DATA
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20
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Item 7.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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20
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Item 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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32
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Item 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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33
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Item 9.
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CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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67
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Item 9A.
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CONTROLS AND PROCEDURES
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67
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Item 9B.
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OTHER INFORMATION
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68
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PART III
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||
Item 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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68
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Item 11.
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EXECUTIVE COMPENSATION
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68
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Item 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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68
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Item 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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68
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Item 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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68
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PART IV
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||
Item 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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69
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SIGNATURES
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71
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ITEM 1. BUSINESS |
·
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No additional layers are added to the screen that may dilute the screen contrast and clarity. Layering technology is required to activate the capacitive and resistive technologies and can be very costly;
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·
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The zForce grid technology is more responsive than the capacitive screen technology and, as a result, is quicker and less prone to misreads. It allows movement and sweeping motions as compared to point-sensitive, stylus-based resistive screens;
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·
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zForce, an abbreviation for zero force necessary, obviates the need to use any force to select or move items on the screen as would be the case with a stylus;
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·
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zForce is cost-efficient due to the lower cost of materials and an extremely simple manufacturing process when compared to the expensive layered capacitive and resistive screens;
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·
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zForce allows multiple methods of input, such as simple finger taps to hit keys, sweeps to zoom in or out, and gestures to write text or symbols directly on the screen;
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·
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zForce is one of the few viable touchscreen solutions that will operate as well on the new revolutionary reflective display panels that will offer paper-like reading experience in almost any ambient lighting condition while greatly reducing power consumption. Manufacturers of reflective display panels are targeting e-Reader, mobile phone and tablet PC markets because these devices require the clear viewing screen and low power consumption of the reflective display panels; and
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·
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zForce incorporates some of the best functionalities of both the capacitive and resistive touchscreen technologies. It works in all climates and, unlike the competing technologies, can be used with thick gloves. In addition, zForce allows for waterproofing of the device.
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·
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The NN1001 has a scanning speed of 1000 Hz (latency down to 1ms) and consumes less than 1mW at 100Hz.
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·
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The NN1001 tracks any high-speed multi-touch gesture with any object (finger, gloved finger and passive pens) with high accuracy.
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·
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The NN1001 connects to any microcontroller or application processor with a high speed SPI interface. The controller works in single or multiple configurations supporting screen sizes up to 20 inch.
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·
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The NN1001 supports advanced power management and implements the Neonode AlwaysON™ technology where the touch is active even when the device is in sleep or off mode.
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·
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Operates on all screen types and provides a crystal-clear viewing experience in any lighting condition, even bright sunlight
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·
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Runs on Electronic Paper Displays that creates a readable experience close to ink on paper because it reflects light like ordinary paper
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·
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Operates on LCD (Liquid Crystal Displays)
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·
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Supports high-resolution pen writing in combination with finger navigation that includes, e.g., gestures, multi-touch, and sweeps
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·
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Provides a 100% clear viewing experience—unlike traditional resistive and capacitive touchscreens
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·
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Can be applied to any flat surface.
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·
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Touch detection for any object
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·
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A smooth touch experience with no necessary pressure for touch detection
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·
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Greater industrial design flexibility for equipment and device manufacturers.
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·
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Pressure sensing
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·
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3D scanning and proximity sensing
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·
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On March 12, 2012, we signed a technology license agreement with IDT Technology Limited, a subsidiary of Oregon Scientific for the use of our touch technology in a children’s tablet device.
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·
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On February 29, 2012, we filed a Certificate of Correction with the Secretary of State of Delaware effectively reducing the amount of our authorized shares from 848,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock to 70,000,000 shares of Common Stock and 1,000,000 shares of Preferred Stock. This correction reflects the new capital structure of the Company following its 1-for-25 reverse split that became effective at the close of business on March 25, 2011.
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·
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On February 21, 2012, we announced the release of our newly developed Multi-Sensing technology that provides a new way for machines to communicate with the human senses, and enables a far more augmented and profound user experience than traditional touch. Multi-Sensing was developed to help OEMs and device manufacturers differentiate themselves in a competitive market. Ready to be implemented into a wide range of commercial devices such as smart phones, tablets and automotive touch displays, Neonode’s Multi-Sensing technology can be used for, but is not limited to, intuitive gaming, industrial design, and 3D modeling. This cutting-edge technology identifies any object and determines its size, pressure, depth, speed and the proximity of an object to a surface. It uses light with zero latency that can sense and determine objects like a pen, brush, bare/gloved finger or larger objects like a hand, at very high speed.
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·
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On January 30, 2012, our Board of Directors adopted an amendment to our 2006 Equity Incentive Plan (the “2006 Plan”) to increase the number of shares of common stock authorized by issuance under the 2006 Plan by an additional two million (2,000,000) shares.
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·
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On January 19, 2012, we signed a technology license agreement with an OEM related to the use of our touchscreen technology for a universal color touch display for Tablet PCs. In conjunction with the signing of this technology license agreement, the OEM agreed to pay us $65,000 in non-recurring engineering development fees. We are deferring the engineering development fee revenue until such time as the engineering work has been completed. We expect to complete all services under this contract in 2012.
|
·
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On January 15, 2012, we signed a technology license agreement with a global top 5 printer OEM to use our touchscreen technology in a series of printers. In conjunction with the signing of this technology license agreement, the OEM agreed to pay us $50,000 in non-recurring engineering development fees. We are deferring the engineering development fee revenue until such time as the engineering work has been completed. We expect to complete all services under this contract in 2012.
|
·
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On January 10, 2012, the U.S. Patent and Trademark Office issued to us patent number 8,095,879 for sweep gesture user interfaces. The patent covers activating a function in response to a touch-and-glide operation on a touch sensitive surface. This patent complements Neonode’s U.S. patents 7,880,732 and 8,068,101 for small to midsize touchscreen devices. The patented technology is marketed and sold as Neonode’s offer to OEMs and ODMs.
|
·
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On January 4, 2012, we signed a technology license agreement with a global OEM to use our touchscreen technology in a series of GPS devices.
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·
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On December 14, 2011, following the consummation of a financing in which the gross proceeds to the Company were in excess of $5 million, the remaining outstanding principal balance of Convertible Notes (approximately $3.7 million), plus accrued interest (approximately $130,000), was automatically converted into 1,513,228 shares of our common stock. In addition, we issued 99,461 shares of common stock related to the bonus interest feature associated with the mandatory conversion of the debt. As of December 31, 2011, all of the March and April 2011 Convertible Notes, plus accrued interest, was paid in cash or converted into shares of common stock.
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·
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On December 13, 2011, we sold 3,000,000 shares of common stock of the Company, par value $0.001 per share, in a public offering pursuant to a Registration Statement on Form S-3. The shares were sold at a price of $4.00 per share. The net proceeds to the Company from this offering were $11.2 million, after deducting the underwriting discount but before deducting other estimated offering expenses of approximately $0.4 million payable by the Company. As part of the offering, the underwriter, Cowen and Company, LLC (the "Underwriter"), sold 1,000,000 shares held by Per Bystedt, our executive chairman, and Thomas Eriksson, our chief executive officer (together, the “Selling Stockholders”). In addition, the Underwriter exercised its over-allotment option and sold an additional 600,000 shares held by the Selling Shareholders. The Company did not receive any proceeds from the sale of any shares by the Selling Stockholders or upon the exercise by the Underwriter of its over-allotment option. The Company anticipates using the net proceeds from the offering primarily for general corporate purposes, including capital expenditures and working capital.
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·
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In October and November 2011 note holders of $575,000 of the original approximately $4.2 million Convertible Notes exercised their right to convert their notes and accrued interest and were issued 232,125 shares of our common stock.
|
·
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In March 2011 we issued convertible notes (the “Convertible Notes”) to investors who loaned the Company an aggregate of approximately $4.2 million. The Convertible Notes were subject to automatic conversion into shares of our common stock, at a conversion price of $2.50 per share, in the event we consummated a financing in the amount of at least $5 million or our common stock was traded at a price of $6.25 or higher for five (5) consecutive trading days.
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·
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Resistive -- uses conductive and resistive layers separated by thin space;
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·
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Surface acoustic wave -- uses ultrasonic waves that pass over the touchscreen panel;
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·
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Capacitive and projected capacitive -- a capacitive touchscreen panel is coated with a material, typically indium tin oxide, that conducts a continuous electrical current across the sensor. When the sensor's 'normal' capacitance field (its reference state) is altered by another capacitance field, e.g., someone's finger, electronic circuits located at each corner of the panel measure the resultant 'distortion' in the sine wave characteristics to detect a touch;
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·
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Infrared -- uses infrared beams that are broken by finger or heat from the finger sensed from a camera to detect a touch;
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·
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Strain gauge -- uses a spring mounted on the four corners and strain gauges are used to determine deflection when the screen is touched;
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·
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Optical imaging -- uses two or more image sensors placed around the edges (mostly the corners) of the screen and a light source to create a shadow of the finger;
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·
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In-cell optical touch technology -- embeds photo sensors or conductive sensors directly into an LCD glass. By integrating the touch function directly into an LCD glass, the LCD acts like a low resolution camera to “see” the shadow of the finger;
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·
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Dispersive signal technology -- uses sensors to detect the mechanical energy in the glass that occur due to a touch; and
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·
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Acoustic pulse recognition -- uses more than two piezoelectric transducers located at some positions of the screen to turn the mechanical energy of a touch (vibration) into an electronic signal.
|
Company | Technology |
3M | Capacitive, Dispersive Signal Touch |
Synaptics | Capacitive sensors and IC controllers |
ATMEL | Capacitive touch IC controllers |
Cypress | Capacitive touch IC controllers |
Maxim | Capacitive touch IC controllers |
Nextwindow | Optical with camera sensor |
Zytronic | Capacitive |
Tyco Electronics | Capacitive, Resistive, Surface Wave, |
Touch International | Resistive and Capacitive |
Mass Multimedia Inc. | All touchscreen technologies |
Young Fast | Capacitive sensor and module maker |
TPK | Capacitive (provides the capacitive touch sensor for the Apple iPhone) |
·
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Amazon accounted for 40%
|
·
|
Barnes & Noble accounted for 26%
|
·
|
Sony Corporation accounted for 21%
|
·
|
KOBO Inc. accounted for 11%
|
ITEM 1A. RISK FACTORS |
|
·
the growth of touchscreen interface usage;
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|
·
the efforts and success of our OEM and other customers;
|
|
·
the level of competition faced by us; and
|
|
·
our ability to meet customer demand for engineering support, new technology and ongoing service.
|
•
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the announcement or introduction of new products or technologies by our competitors;
|
•
|
our ability to upgrade and develop our products and 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; and
|
||
•
|
general economic conditions as well as economic conditions specific to the hand-held device and/or touchscreen industry.
|
·
|
Amazon accounted for 40%
|
·
|
Barnes & Noble accounted for 26%
|
·
|
Sony Corporation accounted for 21%
|
·
|
KOBO Inc. accounted for 11%
|
·
|
actual or anticipated fluctuations in our operating results or future prospects;
|
|
·
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our announcements or our competitors’ announcements of new products;
|
|
·
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the public’s reaction to our press releases, our other public announcements, and our filings with the SEC;
|
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·
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strategic actions by us or our competitors, such as acquisitions or restructurings;
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·
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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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·
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changes in accounting standards, policies, guidance, interpretations or principles;
|
|
·
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changes in our growth rates or our competitors’ growth rates;
|
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·
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developments regarding our patents or proprietary rights or those of our competitors;
|
|
·
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our inability to raise additional capital as needed;
|
|
·
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concern as to the efficacy of our products;
|
|
·
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changes in financial markets or general economic conditions;
|
|
·
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sales of common stock by us or members of our management team; and
|
|
·
|
changes in stock market analyst recommendations or earnings estimates regarding our common stock, other
comparable companies, or our industry generally.
|
ITEM 1B. UNRESOLVED STAFF COMMENTS |
ITEM 2. PROPERTIES |
ITEM 3. LEGAL PROCEEDINGS |
ITEM 4. MINE SAFETY DISCLOSURES |
ITEM 5.
|
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Fiscal Quarter Ended
|
||||||||||||||||
March 31
|
June 30
|
September 30
|
December 31
|
|||||||||||||
Fiscal 2011
|
||||||||||||||||
High
|
$ | 3.35 | $ | 4.40 | $ | 4.70 | $ | 5.97 | ||||||||
Low
|
$ | 1.25 | $ | 2.95 | 3.40 | $ | 4.00 | |||||||||
Fiscal 2010
|
||||||||||||||||
High
|
$ | 1.00 | $ | 1.25 | $ | 2.00 | $ | 2.00 | ||||||||
Low
|
$ | 0.50 | $ | 0. 50 | 0.75 | $ | 1.50 |
ITEM 6. SELECTED FINANCIAL DATA |
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Computer equipment
|
3 years
|
Furniture and fixtures
|
5 years
|
|
·
actual versus anticipated licensing of our technology;
|
|
·
our actual versus anticipated operating expenses;
|
|
·
the timing of our OEM customer product shipments;
|
|
·
the timing of payment for our technology licensing agreements;
|
|
·
our actual versus anticipated gross profit margin;
|
|
·
our ability to raise additional capital, if necessary; and
|
|
·
our ability to secure credit facilities, if necessary.
|
Depreciation and amortization
|
$
|
26
|
||
Stock-based compensation expense
|
550
|
|||
Debt discounts and deferred financing fees and the valuation of conversion
features and warrants
|
14,735
|
|||
Total adjustments to reconcile net loss to net cash used in operating activities
|
$
|
15,311
|
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
FINANCIAL STATEMENTS |
Index to the Consolidated Financial Statements
|
Page
|
Report of Independent Registered Public Accounting Firm
|
34
|
Consolidated Balance Sheets as of December 31, 2011 and 2010
|
35
|
Consolidated Statements of Operations for the years ended December 31, 2011 and 2010
|
36
|
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss for the years
ended December 31, 2011 and 2010
|
37
|
Consolidated Statements of Cash Flows for the years ended December 31, 2011 and 2010
|
38
|
Notes to Consolidated Financial Statements
|
39
|
As of
|
As of
|
|||||||
December 31,
|
December 31,
|
|||||||
2011 | 2010 | |||||||
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$ | 12,940 | $ | 911 | ||||
Accounts receivable
|
3,345 | 151 | ||||||
Debt issuance costs, net
|
-- | 4 | ||||||
Prepaid expenses and other current assets
|
234 | 161 | ||||||
Total current assets
|
16,519 | 1,227 | ||||||
Property and equipment, net
|
108 | 24 | ||||||
Total assets
|
$ | 16,627 | $ | 1,251 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 447 | $ | 442 | ||||
Accrued expenses
|
601 | 643 | ||||||
Deferred revenue
|
1,906 | 540 | ||||||
Convertible debt, net of discounts
|
-- | 2,772 | ||||||
Embedded derivatives of convertible debt and warrants
|
-- | 6,718 | ||||||
Total current liabilities
|
2,954 | 11,115 | ||||||
Total liabilities
|
2,954 | 11,115 | ||||||
Commitments and contingencies (Note 11)
|
||||||||
Stockholders' equity (deficit):
|
||||||||
Series A Preferred stock, 444,541 shares authorized with par value of $0.001 per share;
|
||||||||
83 and 166 shares issued and outstanding
|
||||||||
at December 31, 2011 and 2010, respectively . (In the event of dissolution,
|
||||||||
each share of Series A Preferred stock has a liquidation preference equal to
|
||||||||
par value of $0.001 over the shares of common stock)
|
-- | -- | ||||||
Series B Preferred stock, 54,425 shares authorized with par
|
||||||||
value of $0.001; 114 and 141 shares
|
||||||||
issued and outstanding at December 31, 2011 and 2010, respectively.
|
||||||||
(In the event of dissolution, each share of Series B Preferred stock has a
|
||||||||
liquidation preference equal to par value of $0.001 over the shares of
|
||||||||
common stock)
|
-- | -- | ||||||
Common stock, 70,000,000 and 848,000,000 shares authorized at
|
||||||||
December 31, 2011 and 2010, respectively, with par value of
|
||||||||
$0.001; 32,778,993 and 21,816,602 shares issued and
|
||||||||
outstanding at December 31, 2011 and 2010, respectively
|
33 | 22 | ||||||
Additional paid-in capital
|
142,955 | 102,360 | ||||||
Accumulated other comprehensive income (loss)
|
13 | (63 | ) | |||||
Accumulated deficit
|
(129,328 | ) | (112,183 | ) | ||||
Total stockholders' equity (deficit)
|
13,673 |
(9,864
|
) | |||||
Total liabilities and stockholders' equity (deficit) | $ | 16,627 | $ | 1,251 |
Year ended
|
||||||||
December 31,
|
||||||||
2011
|
2010
|
|||||||
Net revenues
|
$ | 6,067 | $ | 440 | ||||
Cost of revenues
|
908 | 268 | ||||||
Gross margin
|
5,159 | 172 | ||||||
Operating expenses:
|
||||||||
Product research and development
|
1,858 | 1,873 | ||||||
Sales and marketing
|
1,812 | 566 | ||||||
General and administrative
|
3,533 | 3,588 | ||||||
Amortization of fair value of stock issued to
related parties for purchase of
|
||||||||
Neonode Technologies AB (formerly
AB Cypressen)
|
-- | 3,168 | ||||||
Total operating expenses
|
7,203 | 9,195 | ||||||
Operating loss
|
(2,044 | ) | (9,023 | ) | ||||
Other expense:
|
||||||||
Interest and other expense
|
(288 | ) | (179 | ) | ||||
Loss on extinguishment of debt
|
-- | (2,416 | ) | |||||
Non-cash items related to debt discounts and
deferred financing fees
|
||||||||
and the valuation of conversion features and warrants
|
(14,735 | ) | (19,963 | ) | ||||
Total other expense
|
(15,023 | ) | (22,558 | ) | ||||
Loss before provision for income taxes
|
(17,067 | ) | (31,581 | ) | ||||
Provision for income taxes
|
78 | 45 | ||||||
Net loss
|
$ | (17,145 | ) | $ | (31,626 | ) | ||
Loss per common share:
|
||||||||
Basic and diluted loss per share
|
$ | (0.64 | ) | $ | (1.73 | ) | ||
Basic and diluted – weighted average
shares used in per share computations
|
26,784 | 18,293 |
Common stock shares issued
|
Common stock amount
|
Additional paid-in- capital
|
Series A Preferred stock shares issued
|
Series A Preferred stock amount
|
Series B Preferred stock shares issued
|
Series B Preferred stock amount
|
Accumulated other comprehensive income (loss)
|
Accumulated deficit
|
Total Stockholders’ equity (deficit)
|
Other comprehensive
loss
|
||||||||||||||||||||||||||||||||||
Balances, January 1, 2010
|
16,659 | $ | 17 | $ | 74,288 | 3 | $ | - | 1 | $ | - | $ | (96 | ) | $ | (80,557 | ) | $ | (6,348 | ) | ||||||||||||||||||||||||
Employee stock option and warrant compensation expense
|
- | - | 2,262 | - | - | - | - | - | - | 2,262 | ||||||||||||||||||||||||||||||||||
Amortization of fair value of stock issued to
related parties for purchase of Neonode Technologies AB (formerly AB Cypressen)
|
- | - | 3,168 | - | - | - | - | - | - | 3,168 | ||||||||||||||||||||||||||||||||||
Reclassification of derivative liabilities to additional paid-in capital
|
- | - | 19,286 | - | - | - | - | - | - | 19,286 | ||||||||||||||||||||||||||||||||||
Common stock issued to settle lawsuit
|
498 | - | 647 | - | - | - | - | - | - | 647 | ||||||||||||||||||||||||||||||||||
Exchange of Series A Preferred Stock for common stock
|
1,577 | 2 | (2 | ) | (3 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||
Exchange of Series B Preferred Stock for common stock
|
73 | - | - | - | - | (1 | ) | - | - | - | - | |||||||||||||||||||||||||||||||||
Proceeds for issuance of warrants
|
- | - | 49 | - | - | - | - | - | - | 49 | ||||||||||||||||||||||||||||||||||
Common stock issued upon conversion of debt including beneficial conversion feature amounts
|
186 | - | 179 | - | - | - | - | - | - | 179 | ||||||||||||||||||||||||||||||||||
Common stock issued to brokers
|
57 | - | 65 | - | - | - | - | - | - | 65 | ||||||||||||||||||||||||||||||||||
Common stock issued to investors in the 2010 warrant repricing financing transaction
|
2,767 | 3 | 2,418 | - | - | - | - | - | - | 2,421 | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | - | - | - | 33 | - | 33 | 33 | |||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | - | - | - | (31,626 | ) | (31,626 | ) | $ | (31,626 | ) | |||||||||||||||||||||||||||||
Comprehensive loss
|
(31,593 | ) | ||||||||||||||||||||||||||||||||||||||||||
Balances, December 31, 2010 | 21,817 | 22 | 102,360 | - | - | - | - | (63 | ) | (112,183 | ) | (9,864 | ) | |||||||||||||||||||||||||||||||
Stock option and warrant compensation expense to employees and vendors
|
- | - | 550 | - | - | - | - | - | - | 550 | ||||||||||||||||||||||||||||||||||
Common stock issued upon exercise of
warrants
|
543 | 1 | 514 | - | - | - | - | - | - | 515 | ||||||||||||||||||||||||||||||||||
Proceeds from sale of common stock, net of
offering costs
|
3,000 | 3 | 10,784 | - | - | - | - | - | - | 10,787 | ||||||||||||||||||||||||||||||||||
Reclassification of derivative liabilities to additional paid-in capital
|
- | - | 20,075 | - | - | - | - | - | - | 20,075 | ||||||||||||||||||||||||||||||||||
Fair value of warrants issued in connection with issuance of 2011 Senior Secured Convertible Debt
|
- | - | 937 | - | - | - | - | - | - | 937 | ||||||||||||||||||||||||||||||||||
Exchange of Series A Preferred Stock for common stock
|
40 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
Exchange of Series B Preferred Stock for common stock
|
6 | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||
Common stock issued upon conversion of outstanding convertible debt and accrued and bonus interest
|
7,313 | 7 | 7,615 | - | - | - | - | - | - | 7,622 | ||||||||||||||||||||||||||||||||||
Common stock issued for settlement of accrued expenses
|
60 | - | 120 | - | - | - | - | - | - | 120 | ||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | - | - | - | 76 | - | 76 | 76 | |||||||||||||||||||||||||||||||||
Net loss
|
- | - | - | - | - | - | - | - | (17,145 | ) | (17,145 | ) | $ | (17,145 | ) | |||||||||||||||||||||||||||||
Comprehensive loss
|
- | - | - | - | - | - | - | - | - | - | $ | (17,069 | ) | |||||||||||||||||||||||||||||||
Balances, December 31, 2011 | 32,779 | $ | 33 | $ | 142,955 | - | $ | - | - | $ | - | $ | 13 | $ | (129,328 | ) | $ | 13,673 |
Years ended December 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (17,145 | ) | $ | (31,626 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
used in operating activities: | ||||||||
Stock-based compensation expense to employees and vendors | 550 | 5,430 | ||||||
Fair value of common stock issued in settlements | -- | 647 | ||||||
Depreciation and amortization | 26 | 11 | ||||||
Loss on extinguishment of debt | -- | 2,416 | ||||||
Debt discounts and deferred financing fees and the valuation | ||||||||
of conversion features and warrants | 14,735 | 19,963 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (3,228 | ) | (146 | ) | ||||
Prepaid expenses and other current assets | (79 | ) | (16 | ) | ||||
Accounts payable and accrued expenses | 322 | (414 | ) | |||||
Deferred revenue | 1, 366 | 540 | ||||||
Net cash used in operating activities | (3, 453 | ) | (3,195 | ) | ||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | ( 114 | ) | (14 | ) | ||||
Net cash used in investing activities | (114 | ) | ( 14 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from issuance of convertible debt | 4,228 | 1,597 | ||||||
Repayment of convertible debt | (25 | ) | -- | |||||
Proceeds from exercise of warrants | 515 | 49 | ||||||
Proceeds from issuance of common stock, | ||||||||
warrant repricing and preferred stock | 10, 787 | 2 ,421 | ||||||
Net cash provided by financing activities | 15, 505 | 4, 067 | ||||||
Effect of exchange rates on cash | 91 | 25 | ||||||
Net increase in cash | 12,029 | 883 | ||||||
Cash at beginning of year | 911 | 28 | ||||||
Cash at end of year | $ | 12 ,940 | $ | 911 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid in cash | $ | 27 | $ | 180 | ||||
Supplemental disclosure of non-cash transactions: | ||||||||
Exchange of preferred stock for common stock | $ | -- | $ | 806 | ||||
Reclassification of derivative liabilities to additional paid- | ||||||||
in-capital upon conversion of debt and exercise of warrants | $ | 20,075 | $ | 19,286 | ||||
Value of shares of common stock and warrants issued to | ||||||||
brokers in connection with financing, recorded as debt | ||||||||
issuance costs and debt discount | $ | -- | $ | 129 | ||||
Debt issuance costs recorded as part of 2011 financing transaction | $ | 35 | $ | -- | ||||
Debt discount recorded as part of convertible debt financing | ||||||||
transactions, including warrants issued in financing transactions | $ | 4,228 | $ | 1,761 | ||||
Accounts payable converted in 2010 convertible debt offering | $ | -- | $ | 163 | ||||
Accrued expenses settled with shares of common stock | $ | 120 | $ | -- | ||||
Conversion of debt and accrued interest to shares of common stock | $ | 7,222 | $ | 179 | ||||
Debt issuance costs recorded in connection of debt | ||||||||
extinguishment transactions | $ | 20,075 | $ | 4,336 | ||||
Reduction of derivative liabilities upon conversion of debt and | ||||||||
exercise of warrants | $ | -- | $ | 8 |
Estimated useful lives | |
Computer equipment
|
3 years
|
Furniture and fixtures
|
5 years
|
·
|
Amazon accounted for 40%
|
·
|
Barnes & Noble accounted for 26%
|
·
|
Sony Corporation accounted for 21%
|
·
|
KOBO Inc. accounted for 11%
|
·
|
Sony Corporation accounted for 46%
|
·
|
Sony Ericsson Mobile Communications AB accounted for 38%
|
As of December 31,
|
||||||||
2011
|
2010
|
|||||||
Prepaid insurance
|
$ | 46 | $ | 32 | ||||
Prepaid rent
|
49 | 11 | ||||||
Receivable from suppliers
|
1 | 15 | ||||||
VAT receivable
|
110 | 62 | ||||||
Other
|
28 | 41 | ||||||
Total prepaid expenses and other current assets
|
$ | 234 | $ | 161 |
As of December 31,
|
||||||||
2011
|
2010
|
|||||||
Computers, software, furniture and fixtures
|
$ | 151 | $ | 42 | ||||
Less accumulated depreciation
|
(43 | ) | (18 | ) | ||||
Property and equipment, net
|
$ | 108 | $ | 24 | ||||
Depreciation and amortization expense for the year ended
|
$ | 26 | $ | 11 |
As of December 31,
|
||||||||
2011
|
2010
|
|||||||
Earned salary, payroll taxes, vacation and benefits
|
$ | 560 | $ | 205 | ||||
Accrued consulting fees and other
|
41 | 438 | ||||||
Total accrued expenses
|
$ | 601 | $ | 643 |
As of December 31,
|
||||||||
2011
|
2010
|
|||||||
Senior Convertible Secured Notes - 2010
|
$ | - | $ | 1,750 | ||||
Senior Convertible Secured Notes - 2009
|
- | 937 | ||||||
Senior Convertible Secured Notes - 2007
|
- | 85 | ||||||
Total convertible debt
|
$ | - | $ | 2,772 |
For the year
|
||
ended December 31, 2010
|
||
Annual dividend yield
|
-
|
|
Expected life (years)
|
0.50 – 4.8
|
|
Risk-free interest rate
|
0.18% - 1.90%
|
|
Expected volatility
|
117% - 221%
|
For the year
|
||
ended December 31, 2011
|
||
Annual dividend yield
|
-
|
|
Expected life (years)
|
0.08 – 3.0
|
|
Risk-free interest rate
|
0.08% - 1.27%
|
|
Expected volatility
|
110% - 263%
|
January 1, 2010
|
|
$
|
4,507
|
|
Ne Derivatives added in connection with issuance of debt
and equity
|
|
5,236
|
||
Derivatives reclassified to equity in connection with repayment
and conversion of debt
|
|
(19,286
|
) | |
Net increase in fair value
|
|
|
16,261
|
|
December 31, 2010
|
$
|
6,718
|
·
Dividends and Distributions.
|
Series A Preferred:
|
The holders of shares of Series A Preferred stock are entitled to participate with the holders of our common stock with respect to any dividends declared on the common stock in proportion to the number of shares of common stock issuable upon conversion of the shares of Series A Preferred stock held by them.
|
Series B Preferred:
|
The holders of shares of Series B Preferred stock are entitled to participate with the holders of our common stock with respect to any dividends declared on the common stock in proportion to the number of shares of common stock issuable upon conversion of the shares of Series B Preferred stock held by them.
|
·
Liquidation Preference.
|
Series A Preferred:
|
In the event of any liquidation, dissolution, or winding up of our operations, either voluntary or involuntary, subject to the rights of any other series of Preferred stock to be established by the Board of Directors (the “Senior Preferred Stock”), the holders of Series A Preferred stock shall be entitled to receive, after any distribution to the holders of Senior Preferred Stock and prior to and in preference to any distribution to the holders of common stock, $0.001 for each share of Series A Preferred stock then outstanding.
|
Series B Preferred:
|
In the event of any liquidation, dissolution, or winding up of our operations, either voluntary or involuntary, subject to the rights of the Series A Preferred stock and Senior Preferred Stock, the holders of Series B Preferred stock shall be entitled to receive, after any distribution to the holders of Senior Preferred Stock and prior to and in preference to any distribution to the holders of common stock, $0.001 for each share of Series B Preferred stock then outstanding.
|
·
Voting
|
·
Conversion
|
Shares of Preferred Stock Not Exchanged as of December 31, 2011
|
Conversion Ratio
|
Shares of Common Stock after Conversion of all Outstanding Shares of Preferred Stock Not yet Exchanged at December 31, 2011
|
||||||||||
Series A Preferred stock
|
83
|
480.63
|
39,892
|
|||||||||
Series B Preferred stock
|
114
|
132.07
|
15,056
|
|||||||||
Total remaining not exchanged
|
197
|
54,948
|
·
|
The 1996 Stock Option Plan (the “1996 Plan”), which expired in January 2006;
|
|
·
|
The 1998 Non-Officer Stock Option Plan (the “1998 Plan”), which expired in June 2008;
|
·
|
The 2007 Neonode Stock Option Plan (the “Neonode Plan”), from which we will not grant any
additional equity awards; and
|
|
·
|
The 2006 Equity Incentive Plan (the “2006 Plan”).
|
·
|
The 2001 Non-Employee Director Stock Option Plan (the “Director Plan”), which expired in March 2011.
|
Plan
|
Options
Outstanding
|
|||
1996 Plan
|
800 | |||
1998 Plan
|
1,120 | |||
Neonode Plan
|
7,064 | |||
2006 Plan
|
9,000 | |||
Director Plan
|
1,340 | |||
Total
|
19,324 |
Options Outstanding
|
Options Exercisable
|
|||||||||||||||
Range of Exercise Price
|
Number Outstanding at 12/31/11
|
Weighted Average Remaining
Contractual Life (years)
|
Weighted Average
Exercise Price
|
Number Exercisable at 12/31/11
|
Weighted Average
Exercise Price
|
|||||||||||
$ | 0.00 - $ 35.39 |
7,064
|
0.05
|
$
|
35.39
|
7,064
|
$
|
35.39
|
||||||||
$ | 35.40 - $ 58.25 |
780
|
1.95
|
$
|
58.25
|
780
|
$
|
58.25
|
||||||||
$ | 58.26 - $ 86.25 |
3,200
|
3.01
|
$
|
86.25
|
3,200
|
$
|
86.25
|
||||||||
$ | 86.26 - $ 100.00 |
80
|
0.25
|
$
|
100.00
|
80
|
$
|
100.00
|
||||||||
$ | 100.01 - $ 125.00 |
7,400
|
2.57
|
$
|
122.75
|
7,400
|
$
|
122.75
|
||||||||
$ | 125.01 - $ 368.75 |
800
|
0.25
|
$
|
368.75
|
800
|
$
|
368.75
|
||||||||
19,324
|
1.59
|
$
|
92.19
|
19,324
|
$
|
92.19
|
|
Weighted
Average
Number of
Shares
|
Exercise Price
Per Share
|
Weighted-Average
Exercise Price
|
|||||||||
Outstanding at January 1, 2010
|
19,884 | $ | 35.39 – 687.50 | $ | 103.63 | |||||||
Granted
|
-- | $ | -- | $ | -- | |||||||
Cancelled or expired
|
(80 | ) | $ | 348.75 | $ | 348.75 | ||||||
Exercised
|
-- | $ | -- | $ | -- | |||||||
Outstanding at December 31, 2010
|
19,804 | $ | 35.39 – 687.50 | $ | 101.36 | |||||||
Granted
|
-- | $ | -- | $ | -- | |||||||
Cancelled or expired
|
(480 | ) | $ | 135.00- 687.50 | $ | 523.23 | ||||||
Exercised
|
-- | $ | -- | $ | -- | |||||||
Outstanding, vested and expected to vest at December 31, 2011
|
19,324 | $ | 35.39 – 368.75 | $ | 92.19 |
Year ended
December 31, 2010
|
Year ended
December 31, 2011
|
Remaining unamortized expense at
December 31, 2011
|
||||||||
Stock-based compensation
|
$
|
5,430
|
$
|
550
|
$
|
155
|
December 31, 2011
|
||||||||||||
Outstanding and exercisable
|
Warrants
|
Weighted Average Exercise Price
|
Weighted Average
Remaining Contractual Life
|
|||||||||
January 1, 2010
|
7,751,795
|
$
|
0.57
|
3.56
|
||||||||
Issued
|
6,240,500
|
$
|
1.27
|
-
|
||||||||
Expired/forfeited
|
-
|
-
|
-
|
|||||||||
Exercised
|
(8,852,806
|
)
|
$
|
0.62
|
-
|
|||||||
December 31, 2010
|
5,139,489
|
$
|
1.27
|
3.23
|
||||||||
Issued
|
809,543
|
$
|
3.08
|
4.06
|
||||||||
Expired/forfeited
|
--
|
--
|
--
|
|||||||||
Exercised
|
(543,426
|
)
|
$
|
1.04
|
2.74
|
|||||||
Outstanding and exercisable, December 31, 2011
|
5,405,606
|
$
|
1.57
|
2.45
|
Year ending December 31, | Total | |||
2012 | $ |
267
|
||
2013 |
223
|
|||
2014 | 181 | |||
2015 | 60 | |||
$ | 731 |
2011
|
2010
|
|||||||||||||||
Amount
|
Percentage
|
Amount
|
Percentage
|
|||||||||||||
Net revenues made in the U.S.
|
$
|
4,792
|
79
|
%
|
$
|
--
|
--
|
%
|
||||||||
Net revenues made outside of the U.S.
|
$
|
1,275
|
21
|
%
|
$
|
440
|
100
|
%
|
||||||||
$
|
6,067
|
100
|
%
|
$
|
440
|
100
|
%
|
Year Ended
December 31,
|
Year Ended
December 31,
|
|||||||
2011
|
2010
|
|||||||
Domestic
|
$
|
(16,867
|
)
|
$
|
(
29,590
|
)
|
||
Foreign
|
(200)
|
(1,991
|
) | |||||
Total
|
$
|
(17,067
|
)
|
$
|
(
31,581
|
)
|
2011
|
2010
|
|||||||
Current
|
||||||||
Federal
|
$
|
--
|
$
|
--
|
||||
State
|
2
|
1
|
||||||
Foreign
|
76
|
44
|
||||||
Total current
|
$
|
78
|
$
|
45
|
Year Ended
December 31,
|
Year Ended
December 31,
|
|||||||
2011
|
2010
|
|||||||
Amount at standard tax rates
|
34 | % | 34 | % | ||||
Non-deductible loss on revaluation of embedded conversion features and extinguishment of convertible debt
|
(29 | )% | (24 | )% | ||||
Foreign losses at different rates
|
2 | % | -- | |||||
Stock compensation
|
-- | (5 | )% | |||||
7 | % | 5 | % | |||||
Valuation allowance
|
(7 | )% | (5 | )% | ||||
Effective tax rate
|
-- | -- |
December 31,
|
||||||||
2011
|
2010
|
|||||||
Deferred tax assets:
|
||||||||
Accruals
|
$
|
26
|
$
|
85
|
||||
Stock compensation
|
1,080
|
897
|
||||||
Net operating losses
|
4.116
|
2,455
|
||||||
Total deferred tax assets
|
$
|
5,222
|
$
|
3,437
|
||||
Valuation allowance
|
(5,222
|
)
|
(3,437
|
)
|
||||
Total net deferred tax assets
|
$
|
--
|
$
|
--
|
Balance at January 1, 2011
|
$
|
---
|
||
Additions for tax positions of prior years
|
---
|
|||
Reductions for tax position of prior years
|
---
|
|||
Additions based on tax positions related to the current year
|
---
|
|||
Decreases - Settlements
|
---
|
|||
Reductions - Settlements
|
---
|
|||
Balance at December 31, 2011
|
$
|
---
|
(in thousands, except per share amounts) | Year ended December 31, | |||||||
2011 | 2010 | |||||||
BASIC AND DILUTED | ||||||||
Weighted average number of | ||||||||
common shares outstanding | 26,784 | 18,293 | ||||||
Net loss | $ | (17,145 | ) | $ | (31,626 | ) | ||
Net loss per share basic and diluted | $ | (0.64 | ) | $ | (1.73 | ) |
ITEM 9A. CONTROLS AND PROCEDURES |
1.
|
We did not have adequate segregation of duties within our accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have adequate segregation of duties within our accounting functions and concluded that this control deficiency represented a material weakness.
|
2.
|
We did not maintain adequate internal controls or employ adequate resources with sufficient technical expertise in the area of accounting for income taxes to ensure the completeness, accuracy, and review of our consolidated income tax provision and disclosures. Management evaluated the impact of our failure to have adequate controls in this area and concluded that this control deficiency represented a material weakness.
|
3.
|
We did not maintain effective controls over the financial statement disclosures. Specifically, controls were not designed and in place to ensure that disclosures relate to the December 2011 conversion of debt and the related reclassification of derivative liabilities to additional paid-in capital were sufficient. Management evaluated the impact of our failure to have adequate controls in this area and concluded that this control deficiency represented a material weakness.
|
4.
|
We did not maintain adequate design of our internal controls related to the preparation and review of the consolidated statement of cash flows. Management evaluated the impact of our failure to have adequate controls in this area and concluded that this control deficiency represented a material weakness.
|
5.
|
We did not maintain adequate internal controls related to the translation of our subsidiary’s operations into U.S. Dollars in our financial consolidation worksheets, specifically related to our accumulated other comprehensive income (loss). Management evaluated the impact of our failure to have adequate controls in this area and concluded that this control deficiency represented a material weakness.
|
·
|
adding personnel to our accounting department, consultants, or other resources (including those with public company reporting experience) to enhance our policies and procedures, including those related to complex accounting issues;
|
|
·
|
exploring the suitability of further upgrades to our accounting system;
|
|
·
|
preparing written policies and procedures for accounting and financial reporting to establish a formal process to close our books and account for all transactions; and
|
|
·
|
Management will perform an assessment of the effectiveness of our internal control over financial reporting and implement appropriate internal controls on weaknesses determined, if any, documenting, and then testing, the effectiveness of those controls.
|
ITEM 9B. OTHER INFORMATION |
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES |
Exhibit #
|
Description
|
1.1
|
Underwriting Agreement with Cowen and Company, LLC, dated as of December 7, 2011 (
incorporated by reference to Exhibit 1.1 of our Current Report on Form 8-K filed on December 8, 2011
).
|
2.1 | Agreement and Plan of Merger and Reorganization between SBE, Inc. and Neonode Inc., dated January 19, 2007 (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on January 22, 2007 ) |
2.2
|
Amendment No. 1 to the Agreement and Plan of Merger and Reorganization between SBE, Inc. and Neonode Inc., dated May 18, 2007, effective May 25, 2007 (
incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K filed on May 29, 2007
)
|
3.1
|
Amended and Restated Certificate of Incorporation of Neonode Inc., dated April 17, 2009 (
incorporated by reference to Exhibit 10.22 of our Quarterly Report on Form 10-Q filed on August 4, 2009
).
|
3.1.1
|
Certificate of Amendment, dated December 13, 2010 (
incorporated by reference to Exhibit 3.1.1 of our Annual Report on Form 10-K filed on March 31, 2011
) .
|
3.1.2 | Certificate of Amendment, dated March 18, 2011 ( incorporated by reference to Exhibit 3.1 of our Current Report on Form 8-K filed on March 28, 2011 ). |
3.1.3 | Certificate of Correction, dated February 28, 2012 ( filed herewith ). |
3.2
|
Bylaws, as amended through December 5, 2007 (
incorporated by reference as Exhibit 3.2 of our Annual Report on Form 10-K filed on April 15, 2008
)
|
4.1
|
Certificate of Designations, Preferences and Rights of the Series A and Series B Preferred Stock dated 29 December 2008 (
incorporated by reference as Exhibit 4.1 of our Current Report on Form 8-K filed on December 31, 2008
)
|
4.2
|
Certificate of Increase of Designation of Series B Preferred Stock dated 2 January 2009 (
incorporated by reference as Exhibit 4.2 of our Quarterly Report on Form 10-Q filed on October 31, 2011
)
|
4.3
|
Certificate of Increase of Designation of Series B Preferred Stock dated 28 January 2009 (
incorporated by reference as Exhibit 4.3 of our Quarterly Report on Form 10-Q filed on October 31, 2011
)
|
10.1
|
Employment Agreement with Thomas Eriksson (
incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K filed on April 15, 2009)
+
|
10.2
|
Employment Agreement with David W. Brunton, dated July 1, 2010 (
filed herewith
).
|
10.3
|
Convertible Note Agreement, dated January 18, 2010 (
incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K filed on February 23, 2010
)
|
10.4
|
Convertible Promissory Note (
incorporated by reference to Exhibit 10.2 of our Current Report on Form 8-K filed on February 23, 2010
)
|
10.5
|
Form of Common Stock Purchase Warrant (
incorporated by reference to Exhibit 10.3 of our Current Report on Form 8-K filed on February 23, 2010
)
|
21
|
Subsidiaries of the registrant
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
31.1
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002
|
31.2
|
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002
|
32
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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NEONODE INC. | ||
(Registrant) | ||
Date: March 30, 2012
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By:
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/s/ David W. Brunton |
David W. Brunton | ||
Chief Financial Officer, | ||
Vice President, Finance | ||
and Secretary |
Name
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Title
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Date
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/s/
Thomas Eriksson
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Chief Executive Officer,
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March 30, 2012
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Thomas Eriksson
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and Director
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(Principal Executive Officer)
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/s/
David W. Brunton
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Chief Financial Officer, Vice President, Finance
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March 30, 2012
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David W. Brunton
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and Secretary
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(Principal Financial and Accounting Officer)
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/s/
John Reardon
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Director
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March 30, 2012
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John Reardon
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/s/
Mats Dahlin
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Director
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March 30, 2012
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Mats Dahlin
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/s/
Lars Lindqvist
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Director
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March 30, 2012
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Lars Lindqvist
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/s/
Per Bystedt
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Director and Chairman of the Board
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March 30, 2012
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Per Bystedt
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Name
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Jurisdiction
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Neonode Technologies AB
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Sweden
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/s/ KMJ Corbin & Company LLP
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Costa Mesa, California
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March 30, 2012
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/s/ Thomas Eriksson
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Thomas Eriksson
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Chief Executive Officer
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/s/ David W. Brunton
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David W. Brunton
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Chief Financial Officer, Vice President, Finance and
Secretary
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1.
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The report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, except for the audit of our financial statements by our independent registered public accounting firm ; and
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2.
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The information contained in the report fairly presents, in all material respects, the financial condition and results of operation of the Company.
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/s/ Thomas Eriksson
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/s/ David W. Brunton
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Thomas Eriksson
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David W. Brunton
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Chief Executive Officer
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Chief Financial Officer
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