Neonode Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to the Consolidated Financial Statements Page Report of Crowe LLP, Independent Registered Public Accounting Firm (PCAOB ID: 173 ) F-2 Report of KMJ Corbin & Company LLP, Independent Registered Public Accounting Firm (PCAOB ID: 170) F-3 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4 Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 F-5 Consolidated Statements of Comprehensive Loss for the years ended December 31, 2024 and 2023 F-6 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024 and 2023 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 F-8 Notes to the Consolidated Financial Statements F-9 F- 1 REPORT OF CROWE LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of Neonode Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Neonode Inc. (the "Company") as of December 31, 2024, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Crowe LLP We have served as the Company’s auditor since 2024. New York, New York March 21, 2025 F- 2 REPORT OF KMJ CORBIN & COMPANY LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders Neonode Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Neonode Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Emphasis of a Matter - Discontinued Operations As discussed in Note 2 to the consolidated financial statements, the Company concluded that the termination of manufacturing touch sensor modules in 2024 met the criteria for discontinued operations of its products business in accordance with Accounting Standards Codification (“ASC”) 205-20, Presentation of Financial Statements—Discontinued Operations . The financial statements for 2023 have been retrospectively adjusted to reflect the impact of this classification. Our opinion is not modified with respect to this matter. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ KMJ Corbin & Company LLP We served as the Company’s auditor from 2009 to 2024. Glendora, California February 28, 2024 (except for Notes 2, 10 and 11, as to which the date is March 21, 2025) F- 3 NEONODE INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2024 2023 ASSETS Current assets: Cash and cash equivalents $ 16,427 $ 16,155 Accounts receivable and unbilled revenues, net 732 652 Contract assets 51 - Prepaid expenses and other current assets 475 891 Current assets of discontinued operations - 922 Total current assets 17,685 18,620 Non-current assets: Property and equipment, net 62 110 Operating lease right-of-use assets, net 634 - Non-current assets of discontinued operations - 284 Total non-current assets 696 394 Total assets $ 18,381 $ 19,014 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 229 $ 400 Accrued payroll and employee benefits 760 854 Accrued expenses 404 309 Contract liabilities - 2 Current portion of finance lease obligations 2 8 Current portion of operating lease obligations 225 - Current liabilities of discontinued operations - 259 Total current liabilities 1,620 1,832 Non-current liabilities Finance lease obligations, net of current portion - 2 Operating lease obligations, net of current portion 319 - Non-current liabilities of discontinued operations - 17 Total non-current liabilities 319 19 Total liabilities 1,939 1,851 Commitments and contingencies (Note 8)  Stockholders’ equity: Preferred stock, 1,000,000 shares authorized, with par value of $ 0.001 ; no shares issued and outstanding at December 31, 2024 and 2023, respectively - - Common stock, 25,000,000 shares authorized, with par value of $ 0.001 ; 16,782,922 and 15,359,481 shares issued and outstanding at December 31, 2024 and 2023, respectively 17 15 Additional paid-in capital 240,955 235,158 Accumulated other comprehensive loss ( 450 ) ( 396 ) Accumulated deficit ( 224,080 ) ( 217,614 ) Total stockholders’ equity 16,442 17,163 Total liabilities and stockholders’ equity $ 18,381 $ 19,014 The accompanying notes are an integral part of these consolidated financial statements. F- 4 NEONODE INC. CONSOLIDATED STATEMENTS OF OPERATIONS ( In thousands, except per share amounts ) Years ended December 31, 2024 2023 Revenues: License fees $ 2,687 $ 3,803 Non-recurring engineering 421 26 Total revenues 3,108 3,829 Cost of revenues: Non-recurring engineering 116 12 Total cost of revenues 116 12 Gross margin 2 ,992 3,817 Operating expenses: Research and development 3,444 3,833 Sales and marketing 2,328 2,455 General and administrative 3,767 3,266 Total operating expenses 9,539 9,554 Operating loss ( 6,547 ) ( 5,737 ) Other income, net 687 736 Loss before provision for income taxes ( 5,860 ) ( 5,001 ) Provision for income taxes 15 115 Loss from continuing operations ( 5,875 ) ( 5,116 ) Loss from discontinued operations ( 591 ) ( 5,007 ) Net loss $ ( 6,466 ) $ ( 10,123 ) Loss per common share: Basic and diluted loss per share from continuing operations $ ( 0.37 ) $ ( 0.33 ) Basic and diluted loss per share from discontinued operations ( 0.04 ) ( 0.33 ) Basic and diluted net loss per share $ ( 0.41 ) $ ( 0.66 ) Basic and diluted – weighted average number of common shares outstanding 15,873 15,322 The accompanying notes are an integral part of these consolidated financial statements. F- 5 NEONODE INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS ( In thousands ) Years ended December 31, 2024 2023 Net loss $ ( 6,466 ) $ ( 10,123 ) Other comprehensive loss: Foreign currency translation adjustments ( 54 ) ( 56 ) Other comprehensive loss ( 54 ) ( 56 ) Comprehensive loss $ ( 6,520 ) $ ( 10,179 ) The accompanying notes are an integral part of these consolidated financial statements. F- 6 NEONODE INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY ( In thousands ) Common Stock Shares Issued Common Stock Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balances, January 1, 2023 14,456 $ 14 $ 227,235 $ ( 340 ) $ ( 207,491 ) $ 19,418 Issuance of shares for cash, net of offering costs 903 1 7,865 - - 7,866 Stock-based compensation - - 58 - - 58 Foreign currency translation adjustment - - - ( 56 ) - ( 56 ) Net loss - - - - ( 10,123 ) ( 10,123 ) Balances, December 31, 2023 15,359 $ 15 $ 235,158 $ ( 396 ) $ ( 217,614 ) $ 17,163 Issuance of shares for cash, net of offering costs 1,424 2 5,794 - - 5,796 Stock-based compensation - - 3 - - 3 Foreign currency translation adjustment - - - ( 54 ) - ( 54 ) Net loss - - - - ( 6,466 ) ( 6,466 ) Balances, December 31, 2024 16,783 $ 17 $ 240,955 $ ( 450 ) $ ( 224,080 ) $ 16,442 The accompanying notes are an integral part of these consolidated financial statements. F- 7 NEONODE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ( In thousands ) Years ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 6,466 ) $ ( 10,123 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 3 58 Bad debt expense 172 - Loss on disposal of assets 18 - Depreciation and amortization 58 95 Amortization of operating lease right-of-use assets 79 65 Inventory impairment loss 357 3,572 Changes in operating assets and liabilities: Accounts receivable, unbilled revenue and contract assets ( 51 ) 539 Inventory 223 ( 395 ) Prepaid expenses and other current assets 382 ( 201 ) Accounts payable, accrued payroll and employee benefits, and accrued expenses ( 213 ) 173 Contract liabilities ( 10 ) ( 26 ) Operating lease obligations ( 144 ) ( 65 ) Net cash used in operating activities ( 5,592 ) ( 6,308 ) Cash flows from investing activities: Purchase of property and equipment ( 37 ) ( 123 ) Proceeds from sale of property and equipment 189 - Net cash provided by (used in) investing activities 152 ( 123 ) Cash flow from financing activities: Proceeds from issuance of common stock, net of offering costs 5,796 7,866 Principal payments on finance lease obligations ( 17 ) ( 89 ) Net cash provided by financing activities 5,779 7,777 Effect of exchange rate changes on cash and cash equivalents ( 67 ) ( 7 ) Net increase in cash and cash equivalents 272 1,339 Cash and cash equivalents at beginning of year 16,155 14,816 Cash and cash equivalents at end of year $ 16,427 $ 16,155 Supplemental disclosure of cash flow information: Cash paid for interest $ 1 $ 9 Cash paid for income taxes $ 15 $ 115 Supplemental disclosure of non-cash investing and financial activities: Right-of-use asset obtained in exchange for operating lease obligations $ 668 $ - The accompanying notes are an integral part of these consolidated financial statements. F- 8 NEONODE INC. Notes to the Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies Basis of Presentation and Preparation The 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. All inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires making estimates and judgments that affect, at the date of the financial statements, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Significant estimates and judgments include, but are not limited to: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, the standalone selling price of performance obligations, and transaction prices and assessing transfer of control; provisions for uncollectible receivables; for leases, determining whether a contract contains a lease, allocating consideration between lease and non-lease components, determining incremental borrowing rates, and identifying reassessment events, such as modifications; the valuation allowance related to our deferred tax assets; and the fair value of options issued for stock-based compensation. Actual results could differ from these estimates and judgments. Recently Issued Accounting Pronouncement Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The ASU also clarifies that entities with a single reportable segment are subject to both new and existing reporting requirements under Topic 280. We adopted ASU 2023-07 for the annual period ended December 31, 2024 using a retrospective method to all periods presented. See Note 12 Segment Information in the accompanying notes to the consolidated financial statements for further detail. Recently Issued Accounting Pronouncements Pending Adoption In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which updates several disclosures regarding the accounting for income taxes. ASU 2023-09 will become effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-09 will have on our consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2024-03. Foreign Currency Translation and Transaction Gains and Losses The functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen and the South Korean Won. The translation from Swedish Krona, Japanese Yen or South Korean Won to U.S. Dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for income statement accounts using a weighted-average exchange rate during the period. Gains or (losses) resulting from translation are included as a separate component of accumulated other comprehensive income (loss). Foreign currency translation gains (losses) were $( 54,000 ) and $( 56,000 ) during the years ended December 31, 2024 and 2023, respectively. Gains or (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations and were $( 1,000 ) and $( 5,000 ) during the years ended December 31, 2024 and 2023, respectively. Liquidity We have incurred significant operating losses and negative cash flows from operations since our inception. The Company incurred net losses for combined continuing and discontinued operations of approximately $ 6.5 million and $ 10.1 million for the years ended December 31, 2024 and 2023, respectively, and had an accumulated deficit of approximately $ 224.1 million and $ 217.6 million as of December 31, 2024 and 2023, respectively. In addition, operating activities used cash of approximately $ 5.6 million and $ 6.3 million for the years ended December 31, 2024 and 2023, respectively. The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment of liabilities in the ordinary course of business. F- 9 Management has prepared an operating plan and believes that the Company has sufficient cash to meet its obligations as they come due for a year from the date the consolidated financial statements were issued. During the year ended December 31, 2024, we sold an aggregate of 1,423,441 shares of our common stock under the ATM Facility with aggregate net proceeds to us of $ 5.8 million, after payment of commissions to Ladenburg and other expenses of $ 0.2 million. 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. 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. 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. 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, 2024 was $ 0.8 million, and did not include any allowances. The accounts receivable balance on our consolidated balance sheet as of December 31, 2023 was $ 0.7 million, and did not include any allowances. Concentration of Credit and Business Risks Our customers are primarily located in North America, Europe and Asia. As of December 31, 2024, four of our customers represented approximately 80.9 % of our consolidated accounts receivable and unbilled revenues. As of December 31, 2023, three of our customers represented approximately 77.8 % of our consolidated accounts receivable and unbilled revenues. Customers who accounted for 10% or more of our revenues during the year ended December 31, 2024 are as follows. ● Seiko Epson – 27.3 % ● Alpine Electronics – 20.7 % ● Hewlett-Packard Company – 20.4 % ● Commercial Vehicle OEM – 11.8 % Customers who accounted for 10% or more of our revenues during the year ended December 31, 2023 are as follows. ● Hewlett-Packard Company – 33.3 % ● Seiko Epson – 20.2 % ● Alpine Electronics – 18.2 % ● LG Electronics – 13.1 % F- 10 Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and include estimated useful lives. Depreciation on property, plant and equipment is recognized on a straight-line basis. Research and Development Research and development (“R&D”) costs are expensed as incurred. R&D costs consist primarily of personnel related costs in addition to external consultancy costs such as testing, certifying and measurements. 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. We account for equity instruments issued to non-employees at their estimated fair value. 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. Income Taxes We recognize deferred tax liabilities and assets for the expected future tax consequences of items that have been included in the consolidated financial statements or tax returns. We estimate income taxes based on rates in effect in each of the jurisdictions in which we operate. Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and expectations about future taxable income. Valuation allowances are recorded against net deferred tax assets when, in our opinion, realization is uncertain based on the “more likely than not” criteria of the accounting guidance. Based on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of December 31, 2024 and 2023. In the event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase income in the period such determination was made. The provision for income taxes represents the net change in deferred tax amounts, plus income taxes paid or payable for the current period. We follow U.S. GAAP related to accounting for uncertainty in income taxes, which prescribes a model for the recognition, measurement and presentation of uncertainty in income taxes. As a result, we did not recognize a liability for unrecognized tax benefits. As of December 31, 2024 and 2023, we had no unrecognized tax benefits. F- 11 Fair Value of Financial Instruments We disclose the estimated fair values for all financial instruments for which it is practicable to estimate fair value. The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable are deemed to approximate fair value due to their short maturities. Accounting guidance defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The three levels of the fair value hierarchy are described as follows: Level 1: Applies to assets or liabilities for which there are observable quoted prices in active markets for identical assets and liabilities. Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are directly or indirectly observable. Level 3: Applies to assets or liabilities for which inputs are unobservable, and those inputs that are significant to the measurement of the fair value of the assets or liabilities. There were no assets or liabilities recorded at fair value on a recurring basis in 2024 and 2023. Revenue We earn revenues from licensing of our intellectual property, licensing of our software and by performing engineering services. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of our performance obligations. License Fees We earn revenue from licensing our internally developed intellectual property (“IP”) and licensing of our internally developed software. We enter into IP licensing agreements that generally provide licensees the right to incorporate our IP components in their products, with terms and conditions that vary by licensee. Fees under these agreements may include technology access fees payable upfront 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. 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. We recognize royalties following the distribution by our licensees of products incorporating the licensed technology. 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. We also earn license fee revenue by providing our customers with development licenses for our software tools related to the MultiSensing platform. We recognize revenue ratably over the contract term beginning on the commencement date of each contract, which is the date we make the software available to our customers. Our development license contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions. We typically invoice our customers annually in advance for our development licenses upon execution of the initial contract or subsequent renewal. F- 12 Non-Recurring Engineering For technology license that require modification or customization of the underlying technology to adapt the technology to customer use, we determine whether the technology license, and required engineering consulting services represent separate performance obligations. We perform our analysis on a contract-by-contract basis. If there are separate performance obligations, we determine the standalone selling price (“SSP”) of each separate performance obligation to properly recognize revenue as each performance obligation is satisfied. We provide engineering consulting services to our customers under a signed Statement of Work (“SOW”). Deliverables and payment terms are specified in each SOW. We charge an hourly rate or a fixed fee for engineering services. We recognize revenues for hourly rate services as engineering services specified in contracts are completed and accepted by our customers. Revenues for fixed price services are generally recognized over time applying input methods to estimate progress to completion. We believe that recognizing non-recurring engineering services revenues as progress towards completion of engineering services and customer acceptance of those services occurs best reflects the economics of those transactions, because engineering services as tracked in our systems correspond directly with the value to our customers of our performance completed to date. Hours performed for each engineering project are tracked and reflect progress made on each project and are charged at a consistent hourly rate. Any upfront payments we receive for future non-recurring engineering services are recorded as unearned revenue until that revenue is earned. Revenues from non-recurring engineering contracts that are short-term in nature are recorded when those services are complete and accepted by customers. The following tables present the net revenues distribution by geographical area and market: Years ended December 31, 2024 2023 (in thousands) Amount Percentage Amount Percentage North America Net revenues from Automotive $ - - % $ - - % Net revenues from IT & Industrial 763 100.0 % 1,455 100.0 % $ 763 100.0 % $ 1,455 100.0 % Asia Pacific Net revenues from Automotive $ 732 39.4 % $ 1,199 60.1 % Net revenues from IT & Industrial 1,127 60.6 % 796 39.9 % $ 1,859 100.0 % $ 1,995 100.0 % Europe, Middle East and Africa Net revenues from Automotive $ 486 100.0 % $ 379 100.0 % Net revenues from IT & Industrial - - % - - % $ 486 100.0 % $ 379 100.0 % Contract Balances Timing of revenue recognition may differ from the timing of invoicing and receipt of consideration. We record a receivable or unbilled revenue when we have an unconditional right to receive consideration from customers. Contract assets represent revenue recognized for performance to date when the right to consideration is conditional on something other than the passage of time. We record contract liabilities when we receive prepayments or upfront payments ahead of performance. F- 13 The following table presents our accounts receivable, net, contract assets, and contract liabilities: December 31, (in thousands) 2024 2023 2022 Accounts receivable and unbilled revenues $ 732 $ 652 $ 1,119 Contract assets 51 - - Contract liabilities (deferred revenues) - 2 28 Payment terms and conditions vary by the type of contract; however, payments generally occur 30-60 days after invoicing for license fees. Where revenue recognition timing differs from invoice timing, we have determined that our contracts do not include a significant financing component. Applying the practical expedient in Topic 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers, not to provide financing to our customers. Contract Liabilities Contract liabilities (deferred revenues) consist primarily of prepayments for license fees, and other services that we have been paid in advance. We earn the revenue when we transfer control of the service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services. The following table presents our deferred revenues by source: December 31, (in thousands) 2024 2023 2022 Deferred revenues license fees $ - $ 2 $ 20 Deferred revenues non-recurring engineering - - 8 $ - $ 2 $ 28 Deferred revenue were zero as of December 31, 2024. The Company recognized revenues of approximately $ 2,000 and $ 25,000 , for 2024 and 2023, respectively, related to contract liabilities outstanding at the beginning of the year. Costs to Obtain Contracts We record the incremental costs of obtaining a contract with a customer as a contract asset if we expect the benefit of those costs to cover a period greater than one year. We currently have no incremental costs that must be capitalized. We expense as incurred costs of obtaining a contract when the amortization period of those costs would have been less than or equal to one year. 2. Discontinued Operations During the fourth quarter of 2023 the Company decided to phase out the product business and as a consequence terminate production at the Pronode Technologies AB facilities in Kungsbacka, Sweden. Subsequently, we commenced the phase out of our TSM product business during the first quarter of 2024 through licensing of the TSM technology to strategic partners or outsourcing. In May 2024, we stopped producing TSMs and started to shut down the factory. The facility lease terminated as of September 30, 2024 and was not renewed. The Company concluded that the termination of TSM manufacturing met the criteria for discontinued operations. As a result, this business has been reclassified to discontinued operations in these consolidated financial statements for all periods presented. F- 14 Assets and Liabilities of Discontinued Operations Assets and liabilities of discontinued operations are presented separately in the condensed consolidated balance sheets for all periods presented. On December 31, 2024 and December 31, 2023, these balances consisted of assets and liabilities of the Company’s Products business. The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the assets and liabilities of discontinued operations as presented on the Company’s consolidated balance sheets: December 31, (in thousands) 2024 2023 ASSETS OF DISCONTINUED OPERATIONS Current assets of discontinued operations: Accounts receivable and unbilled revenues, net $ - $ 265 Inventory - 610 Prepaid expenses and other current assets - 47 Total current assets of discontinued operations - 922 Non-current assets of discontinued operations: Property and equipment, net - 230 Operating lease right-of-use assets, net - 54 Total non-current assets of discontinued operations - 284 Total assets of discontinued operations $ - $ 1,206 LIABILITIES OF DISCONTINUED OPERATIONS Current liabilities of discontinued operations: Accounts payable $ - $ 40 Accrued payroll and employee benefits - 87 Accrued expenses - 45 Contract liabilities - 8 Current portion of finance lease obligations - 25 Current portion of operating lease obligations - 54 Total current liabilities of discontinued operations - 259 Non-current liabilities of discontinued operations: Finance lease obligations, net of current portion - 17 Total non-current liabilities of discontinued operations - 17 Total liabilities of discontinued operations $ - $ 276 Loss from Discontinued Operations Discontinued operations for the years ended December 31, 2024 and 2023, respectively, consists of results from the Company’s products business. F- 15 The following table provides details about the major classes of line items constituting “Loss from discontinued operations” as presented on the Company’s condensed consolidated statements of operations: Years ended December 31, (in thousands) 2024 2023 Revenues: Products $ 1,171 $ 620 Total revenues 1,171 620 Cost of revenues: Products 989 4,168 Loss on purchase commitment - 362 Total cost of revenues 989 4,530 Gross (loss) margin 182 ( 3,910 ) Operating expenses: Sales and marketing 165 - General and administrative 590 1,097 Total operating expenses 755 1,097 Operating loss ( 573 ) ( 5,007 ) Other income (expense), net ( 18 ) - Loss from discontinued operations $ ( 591 ) $ ( 5,007 ) Cash Flows Information The following table presents cash flow information for discontinued operations: Year ended December 31, (in thousands) 2024 2023 Depreciation and amortization $ 19 $ 47 Amortization of operating lease ROU assets 52 65 Inventory impairment loss 357 3,572 Bad debt expense 172 - Purchase of property and equipment - ( 123 ) Proceeds from sale of property and equipment 190 - 3. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: December 31, (in thousands) 2024 2023 Prepaid insurance $ 93 $ 106 Prepaid rent - 88 VAT receivable 172 410 Other 210 287 Total prepaid expenses and other current assets $ 475 $ 891 F- 16 4. Property and Equipment Property and equipment, net consist of the following: December 31, (in thousands) 2024 2023 Computers, software, furniture and fixtures $ 277 $ 396 Equipment 21 23 Less accumulated depreciation and amortization ( 236 ) ( 309 ) Property and equipment, net $ 62 $ 110 Depreciation and amortization expense was $ 39,000 and $ 47,000 for the years ended December 31, 2024 and 2023, respectively. 5. Accrued Expenses Accrued expenses consist of the following: December 31, (in thousands) 2024 2023 Accrued audit fees $ 74 $ - Accrued other compensation 107 - Accrued bonus costs 172 91 Accrued costs related to customer claim - 139 Accrued consulting fees and other 51 79 Total accrued expenses $ 404 $ 309 6. Stockholders’ Equity Preferred Stock As of December 31, 2024 and 2023, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 1,000,000 shares of preferred stock, par value $ 0.001 per share. There were no transactions in our preferred stock during the years ended December 31, 2024 and 2023. No shares of preferred stock were issued and outstanding as of December 31, 2024 and 2023. Common Stock As of December 31, 2024 and 2023, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 25,000,000 shares of common stock, par value $ 0.001 per share. 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 of $ 7,866,000 , after payment of commissions to B. Riley Securities and other expenses of $ 244,000 . During the year ended December 31, 2024, we sold an aggregate of 1,423,441 shares of our common stock under the Ladenburg ATM Facility with aggregate net proceeds to us of $ 5.8 million, after payment of commissions to Ladenburg and other expenses of $ 0.2 million. 7. Stock-Based Compensation We have adopted equity incentive plans for which stock options and restricted stock awards are available for grants to employees, consultants and directors. Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options. Vesting for all outstanding option grants is based solely on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments. F- 17 Stock Options and Long-Term Incentive Plan During the year ended December 31, 2020, our stockholders approved the 2020 Plan which replaced our 2015 Stock Incentive Plan (the “2015 Plan”), which in turn replaced our Neonode Inc. 2006 Equity Incentive Plan (the “2006 Plan”). There are no awards outstanding under the 2006 Plan and 2015 Plan. Under the 2020 Plan, 750,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2020 Plan are set by our compensation committee at its discretion. In 2020, we established the 2020 LTIP to provide eligible persons with the opportunity to acquire an equity interest, or otherwise increase their equity interest, in the Company as an incentive for them to remain in the service of the Company. Through the 2020 LTIP, eligible employees of Neonode may waive between 50 % to 67 % of future unearned bonuses that may be awarded to them under the Company’s annual bonus arrangement in exchange for the grant of shares of the Company’s common stock. The following table summarizes the combined activity under all of the stock option plans: Options Outstanding Weighted- Average Weighted- Remaining Average Contractual Aggregate Number of Exercise Life Intrinsic Shares Price (in years) Value Options outstanding – January 1, 2023 2,500 $ 14.40 0.59 $ - Options granted - - - - Options exercised - - - - Options cancelled or expired ( 2,500 ) 14.40 - - Options outstanding – December 31, 2023 - $ - - - Options granted - - - - Options exercised - - - - Options cancelled or expired - - - - Options outstanding and vested – December 31, 2024 - $ - - $ - No stock options were granted during the years ended December 31, 2024 and 2023. During the years ended December 31, 2024 and 2023, we recorded no stock-based compensation expense related to the vesting of stock options. The estimated fair value of the stock options will be calculated using the Black-Scholes option pricing model as of the grant date of the stock option. Stock options granted under the 2006, 2015 and 2020 Plans are exercisable over a maximum term of 10 years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant. 8. Commitments and Contingencies Legal The Company is subject to legal proceedings and claims that may arise in the ordinary course of business. The Company is not aware of any pending or threatened litigation matters at this time that would have a material impact on the operations of the Company. 9. Leases The Company has leases mainly consisting of the corporate office. This kind of lease typically has an original lease term of one to three years . Future renewal options that are not likely to be executed as of the consolidated balance sheet date are excluded from right-of-use assets and related lease liabilities. The lease is automatically renewed at a cost increase of 2 % on an annual basis, unless we provide written notice nine months prior to the respective expiration dates. Operating lease right of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company has entered into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on the Company's Consolidated Balance Sheets. All operating lease expense is recognized on a straight-line basis over the lease term. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. For finance leases, the implicit rate is used, since it is readily available. F- 18 The components of lease expense were as follows (in thousands): Years ended December 31, 2024 2023 Finance lease cost: Amortization of leased assets $ 6 $ 6 Interest on lease liabilities 1 1 Operating lease cost 31 330 Short-term lease cost 418 $ 98 Total lease cost $ 456 435 The Company made cash payments regarding operating leases of $ 27,000 and $ 0 for the years ended December 31, 2024 and 2023, respectively. The Company made cash payments regarding finance leases of $ 18,000 and $ 96,000 for the years ended December 31, 2024 and 2023, respectively. The following table shows right-of-use assets and lease liabilities: December 31, (in thousands) 2024 2023 Right-of-use assets: Operating leases $ 634 $ - Finance leases 21 23 Total right-of-use assets $ 655 $ 23 Lease liabilities: Current portion of operating lease obligations $ 225 $ - Operating lease obligations, net of current portion 319 - Current portion of finance lease obligations 2 8 Finance lease obligations, net of current portion - 2 Total lease liabilities $ 546 $ 10 Lease liability maturities are as follows: (in thousands) Operating Leases Finance Leases Total 2025 $ 249 2 $ 251 2026 328 - 328 Total 577 2 579 Less: Imputed interest ( 33 ) - ( 33 ) Total lease liabilities $ 544 2 $ 546 Lease liabilities, current $ 225 $ 2 $ 227 Lease liabilities, non-current 319 - 319 Total lease liabilities $ 544 $ 2 $ 546 The weighted-average remaining lease term related to the Company’s operating lease liabilities as of December 31, 2024 and December 31, 2023 was 1.9 years and 0.8 years, respectively. The discount rate related to the Company’s operating lease liabilities as of December 31, 2024 and December 31, 2023 was 5.0 % for each of the years. The weighted-average remaining lease term related to the Company’s finance lease liabilities as of December 31, 2024 and December 31, 2023 was 0.2 years and 1.3 years, respectively. The discount rate related to the Company’s operating lease liabilities as of December 31, 2024 and December 31, 2023 was 3.0 % and 2.6 %, respectively. F- 19 10. Segment Information The Company operates as one operating segment. Our chief operating decision maker ("CODM") is our Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating loss and net loss to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of revenues, research and development, sales and marketing, and general and administrative expenses. The following table presents key financial information with respect to the Company’s single operating segment: Years ended December 31, (in thousands) 2024 2023 Revenues $ 3,108 $ 3,829 Costs and expenses (a) Cost of revenues 116 12 Product R&D 151 116 General and administrative, including rent 1,297 1,480 Payroll and related 6,332 6,330 Professional fees and IP 1,351 1,117 Marketing and travel 483 412 Total costs and expenses 9,730 9,467 Other segment items (b) 75 ( 99 ) Other income, net 687 736 Loss before provision for income taxes ( 5,860 ) ( 5,001 ) Provision for income taxes 15 115 Loss from continuing operations $ ( 5,875 ) $ ( 5,116 ) (a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision-maker. (b) Other segment items primarily include depreciation and amortization, payroll and related - re-allocated to cost of revenues, and stock options expense. The following table presents the long-lived assets property and equipment and right-of-use assets by geographic area: December 31, 2024 2023 Sweden $ 696 $ 109 Asia - 1 Total $ 696 $ 110 We report revenues from external customers based on the country where the customer is located. The following table presents net revenues by country: Years ended December 31, 2024 2023 (in thousands) Amount Percentage Amount Percentage Japan $ 1,731 55.8 % $ 1,476 38.5 % Sweden 365 11.7 % - - % Germany 116 3.7 % 379 9.9 % South Korea 97 3.1 % 501 13.1 % China 31 1.0 % 18 0.5 % Other 5 0.2 % 1 - % $ 2,345 75.5 % $ 2,375 62.0 % United States 763 24.5 % 1,454 38.0 % $ 3,108 100.0 % $ 3,829 100.0 % F- 20 11. Income Taxes During 2024, the Company identified errors in the calculation of net operating loss carryforwards, resulting in balances for deferred tax assets and the corresponding valuation allowance being overstated at December 31, 2023. Following an analysis of quantitative and qualitative factors in accordance with SEC Staff Accounting Bulletin 99, Materiality, the Company concluded that the errors were not material to the previously issued consolidated financial statements, and thus, no restatement of any of the Company’s previously issued consolidated financial statements is necessary. These amounts have been corrected from the amounts that were previously reported in the footnotes to the December 31, 2023 consolidated financial statements in the 2023 tables below as follows: 1. An increase to the foreign deferred tax provision and a corresponding decrease in the change in valuation allowance of $ 7,424,000 . 2. A decrease in gross deferred tax assets and the corresponding valuation allowance of $ 7,424,000 . These corrections did not impact the financial position, operating results or cash flows of the Company as of and for the year ended December 31, 2023. Loss before provision for income taxes was distributed geographically as follows: Years ended December 31, (in thousands) 2024 2023 Domestic $ ( 5,888 ) $ ( 5,221 ) Foreign 28 220 Total $ ( 5,860 ) $ ( 5,001 ) The provision (benefit) for income taxes is as follows: Years ended December 31, (in thousands) 2024 2023 Current Federal $ - $ - State - - Foreign 15 115 Total current expense 15 115 Deferred Federal ( 784 ) ( 1,054 ) State 99 - Foreign 23 6,361 Change in valuation allowance 662 ( 5,307 ) Total deferred expense - - Total provision for income taxes $ 15 $ 115 The differences between our effective income tax rate and the U.S. federal statutory federal income tax rate are as follows: Years ended December 31, 2024 2023 Amounts at statutory tax rates 21 % 21 % Foreign losses taxed at different rates ( 2 )% ( 20 )% Stock-based compensation - % - % GILTI inclusion ( 8 )% - % Other - % ( 3 )% Total 11 % ( 2 )% Valuation allowance ( 11 )% - % Effective tax rate - % ( 2 )% Significant components of the deferred tax asset balances are as follows: December 31, (in thousands) 2024 2023 Deferred tax assets: Accruals $ - $ 3 Net operating losses 22,124 21,320 Gross deferred tax assets 22,124 21,323 Valuation allowance ( 22,108 ) ( 21,323 ) Total deferred tax assets 16 - Deferred tax liabilities: Accruals ( 16 ) - Net deferred tax assets $ - $ - F- 21 Valuation allowances are recorded to offset certain deferred tax assets due to management’s uncertainty of realizing the benefits of these items. Management applies a full valuation allowance for the accumulated losses of Neonode Inc., and its subsidiaries, since it is not determinable using the “more likely than not” criteria that there will be any future benefit of our deferred tax assets. This is mainly due to our history of operating losses. As of December 31, 2024, we had federal, state and foreign net operating losses of $ 84.6 million, $ 18.7 million and $ 14.9 million, respectively. Of the total federal loss carryforward, approximately $ 58.0 million will begin to expire in 2028 and the remainder do not expire. The California loss carryforward will begin to expire in 2030. The foreign loss carryforward, which is generated in Sweden, does not expire. Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and tax credit carryforwards before utilization. As of December 31, 2024, we had not completed the determination of the amount to be limited under the provision. We follow the provisions of accounting guidance which includes a two-step approach to recognizing, derecognizing and measuring uncertain tax positions. There were no unrecognized tax benefits for the years ended December 31, 2024 and 2023. We follow the policy to classify accrued interest and penalties as part of the accrued tax liability in the provision for income taxes. For the years ended December 31, 2024 and 2023 we did not recognize any interest or penalties related to unrecognized tax benefits. As of December 31, 2024, we had no uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations. We file income tax returns in the U.S. federal jurisdiction, California, Sweden, and Japan. The 2008 through 2023 tax years are open and may be subject to potential examination in one or more jurisdictions. We are not currently under any federal, state or foreign income tax examinations. 12. Employee Benefit Plans We participate in a number of individual defined contribution pension plans for our employees in Sweden. We contribute between 4.5 % and 30 % of the employee’s annual salary to these pension plans depending on age and salary level. Contributions relating to these defined contribution plans for the years ended December 31, 2024 and 2023 were $ 542,000 and $ 510,000 , respectively. We match U.S. employee contributions to a 401(K) retirement plan up to a maximum of six percent ( 6 %) of an employee’s annual salary. Contributions relating to the matching 401(K) contributions for the years ended December 31, 2024 and 2023 were $ 6,000 and $ 6,000 , respectively. In Taiwan, we contribute six percent ( 6 %) of the employee’s annual salary to a pension fund which agrees with Taiwan’s Labor Pension Act. Contributions relating to the Taiwanese pension fund for the years ended December 31, 2024 and 2023 were $ 3,000 and $ 3,000 , respectively. 13. Net Loss Per Share Basic net loss per common share for the years ended December 31, 2024 and 2023 was computed by dividing the net loss attributable to common shareholders of Neonode Inc. for the relevant period by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share is computed by dividing net loss attributable to common shareholders of Neonode Inc. for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding during the year. The Company had no potential common stock equivalents as of December 31, 2024 or 2023. Years ended December 31, (In thousands, except per share amounts) 2024 2023 BASIC AND DILUTED Weighted average number of common shares outstanding 15,873 15,322 Loss from continuing operations $ ( 5,875 ) $ ( 5,116 ) Loss from discontinued operations ( 591 ) ( 5,007 ) Net loss $ ( 6,466 ) $ ( 10,123 ) Loss per share from continuing operations - basic and diluted ( 0.37 ) ( 0.33 ) Loss per share from discontinued operations - basic and diluted ( 0.04 ) ( 0.33 ) Net loss per share - basic and diluted $ ( 0.41 ) $ ( 0.66 ) 14. Subsequent Events No subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto. F- 22 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.