Financial Statements
−Removed: CONSOLIDATED BALANCE SHEETS
−Removed: thousands, except share and per share amounts)
+Added: CONDENSED CONSOLIDATED BALANCE SHEETS
+Added: (In thousands, except share and per share
+Added: September 30,
Current assets:
12 unchanged sentences
Deferred revenues
−Removed: Short-term borrowing
−Removed: Short-term tax credits
Current portion of finance lease obligations
7 unchanged sentences
Common stock, 25,000,000 shares authorized, with par value of $0.001;
−Removed: 9,171,154 shares issued and outstanding at June 30, 2020 and December 31, 2019
+Added: 11,467,377 and 9,171,154 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
Additional paid-in capital
6 unchanged sentences
Total liabilities and stockholders’
−Removed: accompanying notes are an integral part of these condensed consolidated financial statements.
−Removed: CONSOLIDATED STATEMENTS OF OPERATIONS
−Removed: thousands, except per share amounts)
+Added: The accompanying notes are an integral part
+Added: of these condensed consolidated financial statements.
+Added: CONDENSED CONSOLIDATED STATEMENTS OF
+Added: (In thousands, except per share amounts)
Three months ended
−Removed: Six months ended
+Added: September 30,
+Added: Nine months ended
+Added: September 30,
HMI Solutions
13 unchanged sentences
Total other expense
−Removed: Loss before provision for income taxes
−Removed: Provision for income taxes
+Added: Loss before provision (benefit) for income taxes
+Added: Provision (benefit) for income taxes
Net loss including noncontrolling interests
1 unchanged sentence
Net loss attributable to Neonode Inc.
+Added: Preferred dividends
+Added: Net loss attributable to common shareholders of Neonode Inc.
Loss per common share:
2 unchanged sentences
weighted average number of common shares outstanding
−Removed: accompanying notes are an integral part of these condensed consolidated financial statements.
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
+Added: The accompanying notes are an integral part
+Added: of these condensed consolidated financial statements.
+Added: CONDENSED CONSOLIDATED STATEMENTS OF
+Added: COMPREHENSIVE LOSS
+Added: (In thousands)
Three months ended
−Removed: Six months ended
+Added: September 30,
+Added: Nine months ended
+Added: September 30,
Other comprehensive income (loss):
3 unchanged sentences
Comprehensive loss attributable to Neonode Inc.
−Removed: accompanying notes are an integral part of these condensed consolidated financial statements.
−Removed: CONSOLIDATED STATEMENTS OF STOCKHOLDERS’
−Removed: thousands, except for Series B Preferred Stock Shares Issued)
−Removed: the Quarter to Date periods ended June 30, 2019 through June 30, 2020
−Removed: B Preferred Stock Shares Issued
−Removed: B Preferred Stock Amount
−Removed: Stock Shares Issued
−Removed: Paid-in Capital
−Removed: Other Comprehensive Income
+Added: The accompanying notes are an integral part
+Added: of these condensed consolidated financial statements.
+Added: CONDENSED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’
+Added: (In thousands, except for Preferred Stock
+Added: Shares Issued 1 )
+Added: For the Quarter to Date periods ended
+Added: September 30, 2019 through September 30, 2020
+Added: Preferred Stock
+Added: Shares Issued
+Added: Preferred Stock
+Added: Common Stock Shares
+Added: Common Stock Amount
+Added: Additional Paid-in
+Added: Comprehensive
+Added: Stockholders’
Noncontrolling
Stockholders’
−Removed: December 31, 2018
−Removed: currency translation adjustment
+Added: Balances, December 31,
+Added: Foreign currency translation
March 31, 2019
−Removed: of series B Preferred Stock to Common Stock
−Removed: currency translation adjustment
+Added: Conversion of Series B Preferred
+Added: Stock to common stock
+Added: Foreign currency translation
June 30, 2019
−Removed: of series B Preferred Stock to Common Stock
−Removed: currency translation adjustment
+Added: Conversion of Series B Preferred
+Added: Stock to common stock
+Added: Foreign currency translation
September 30, 2019
−Removed: stock issued upon exercise of common stock warrants
−Removed: currency translation adjustment
+Added: Common stock issued upon exercise
+Added: of common stock warrants
+Added: Foreign currency translation
December 31, 2019
−Removed: currency translation adjustment
+Added: Foreign currency translation
March 31, 2020
−Removed: currency translation adjustment
+Added: Foreign currency translation
June 30, 2020
−Removed: accompanying notes are an integral part of these condensed consolidated financial statements.
−Removed: CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: Six months ended
+Added: Issuance of shares for cash,
+Added: net of offering costs
+Added: Series C-2 Preferred Stock
+Added: issued for repayment of short-term borrowings and accrued interest
+Added: Conversion of Series C-1 and C-2 Preferred Stock to common stock
+Added: Preferred dividends
+Added: Foreign currency translation
+Added: September 30, 2020
+Added: The accompanying notes are an integral part
+Added: of these condensed consolidated financial statements.
+Added: 1 Preferred Shares Issued per series can be found under
+Added: the equity footnote (see Note 4).
+Added: CONDENSED CONSOLIDATED STATEMENTS OF
+Added: (In thousands)
+Added: Nine months ended
+Added: September 30,
Cash flows from operating activities:
16 unchanged sentences
Cash flows from financing activities:
+Added: Proceeds from issuance of preferred and common stock, net of offering costs
Proceeds from short term borrowings
Proceeds from short term tax credits
+Added: Payments on short term borrowings
+Added: Payments on short term tax credits
Principal payments on finance lease obligations
+Added: Payment of preferred dividend
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash
−Removed: Net decrease in cash
+Added: Net increase (decrease) in cash
Cash at beginning of period
3 unchanged sentences
Cash paid for interest
−Removed: accompanying notes are an integral part of these condensed consolidated financial statements.
+Added: Supplemental disclosure of non-cash investing and financing activities:
+Added: Short-term borrowings and accrued interest settled for Series C-2 Preferred Stock
+Added: Accrual of dividends
+Added: Right-of-use asset obtained in exchange for lease obligation
+Added: The accompanying notes are an integral part
+Added: of these condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial
4 unchanged sentences
for the interim periods presented.
−Removed: The results of operations for the six months ended June 30, 2020 are not necessarily indicative
+Added: The results of operations for the nine months ended September 30, 2020 are not necessarily indicative
of results for a full fiscal year or any other period.
The accompanying condensed
−Removed: consolidated financial statements for the three and six months ended June 30, 2020 and 2019 have been prepared by us, pursuant
+Added: consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 have been prepared by us, pursuant
to the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”).
6 unchanged sentences
Neonode Inc., collectively
−Removed: with its subsidiaries is referred to as “Neonode”, develops optical touch and gesture control solutions for human interaction
−Removed: with devices and remote sensing solutions for driver monitoring and cabin monitoring features in automotive and other applications.
−Removed: Our operations
−Removed: from January 1, 2020 focused on three different business areas, human machine interface (“HMI”) Solutions, HMI
−Removed: Products and Remote Sensing Solutions.
−Removed: In HMI Solutions, Neonode offers customized optical touch and gesture control
−Removed: solutions for many different markets and segments.
−Removed: In HMI Products, the Company provides plug-and-play sensor modules that
−Removed: enable touch on any surface, in-air touch, and gesture control for a wide range of applications.
−Removed: In Remote Sensing Solutions,
−Removed: Neonode offers driver and cabin monitoring solutions for vehicles based on the Company’s flexible, scalable and
−Removed: hardware-agnostic software platform.
+Added: with its subsidiaries is referred to as “Neonode”
+Added: or the “Company”, develops optical touch and gesture
+Added: control solutions for human interaction with devices and remote sensing solutions for driver monitoring and cabin monitoring features
+Added: in automotive and other applications.
+Added: Our operations from
+Added: January 1, 2020 focused on three different business areas, human machine interface (“HMI”) Solutions, HMI Products
+Added: and Remote Sensing Solutions.
+Added: In HMI Solutions, Neonode offers customized optical touch and gesture control solutions for many
+Added: different markets and segments.
+Added: In HMI Products, the Company provides plug-and-play sensor modules that enable touch on any surface,
+Added: in-air touch, and gesture control for a wide range of applications.
+Added: In Remote Sensing Solutions, Neonode offers driver and cabin
+Added: monitoring solutions for vehicles based on the Company’s flexible, scalable and hardware-agnostic software platform.
We have incurred significant
operating losses and negative cash flows from operations since our inception.
−Removed: The Company incurred net losses of approximately
−Removed: $1.6 million and $2.6 million and $1.3 million and $1.8 million for the three and six months ended June 30, 2020 and 2019, respectively,
−Removed: and had an accumulated deficit of approximately $193.1 million and $190.5 million as of June 30, 2020 and December 31, 2019, respectively.
−Removed: In addition, operating activities used cash of approximately $1.9 million and $1.5 million for the six months ended June 30, 2020
−Removed: and 2019, respectively.
−Removed: On June 17, 2020, the Company
−Removed: entered into short-term loan facilities (the “Loan Agreements”) with entities beneficially owned by each of Ulf Rosberg
−Removed: and Peter Lindell, directors of Neonode (the “Directors”).
−Removed: Pursuant to the Loan Agreements, each Director made 16,145,000
−Removed: SEK (Swedish Krona), which is approximately $1.7 million in U.S.
−Removed: dollars, principal amount available to the Company.
−Removed: 30, 2020, the Company has made an initial drawdown of an aggregate of approximately $1.0 million under the Loan Agreements.
+Added: The Company incurred net losses attributable to
+Added: of approximately $1.6 million and $4.3 million and $1.1 million and $2.9 million for the three and nine months ended
+Added: September 30, 2020 and 2019, respectively, and had an accumulated deficit of approximately $194.8 million and $190.5 million as
+Added: of September 30, 2020 and December 31, 2019, respectively.
+Added: In addition, operating activities used cash of approximately $3.7 million
+Added: and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively.
+Added: On June 17, 2020, the
+Added: Company entered into short-term loan facilities (the “Loan Agreements”) with two entities beneficially owned respectively
+Added: by each of Ulf Rosberg and Peter Lindell, directors of Neonode (each, a “Director”).
+Added: Pursuant to the Loan Agreements,
+Added: each Director made 16,145,000 SEK (Swedish Krona), which is approximately $1.7 million in U.S.
+Added: dollars, principal amount available
+Added: to the Company.
+Added: The Company made an initial drawdown of an aggregate of approximately $1.0 million under the Loan Agreements.
On August 5, 2020,
1 unchanged sentence
accredited investors as part of a private placement (the “Private Placement”).
−Removed: The closing of the
−Removed: Private Placement occurred on August 7, 2020.
+Added: On August 6, 2020,
+Added: in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series
+Added: C-1 5% Convertible Preferred Stock (the “Series C-1 Preferred Stock”) by filing a Series C-1 Certificate of Designation
+Added: of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized
+Added: and unissued preferred stock as Series C-2 5% Convertible Preferred Stock (the “Series C-2 Preferred Stock”) by filing
+Added: a Series C-2 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware.
+Added: The Series C-1 Preferred Stock and Series C-2 Preferred Stock are substantially the same, except the conversion of the Series C-2
+Added: Preferred Stock requires additional shareholder approval in accordance with Nasdaq listing rules.
+Added: On August 7, 2020,
+Added: Neonode issued 517 shares of Series C-2 Preferred Stock to UMR Invest AB, the entity beneficially owned by Ulf Rosberg, to repay
+Added: the indebtedness and accrued interest under the Loan Agreement.
+Added: To effect a similar transaction with entities beneficially owned
+Added: by the other Director, Peter Lindell, (i) on August 7, 2020, at the closing of the Private Placement, Cidro Förvaltning AB
+Added: paid for an additional 517 shares of Series C-2 Preferred Stock, and (ii) on August 10, 2020, the next business day after the closing
+Added: of the Private Placement, Neonode repaid to Cidro Holding AB the debt and accrued interest due under the Loan Agreement, an amount
+Added: that equaled the price of the 517 shares of Series C-2 Preferred Stock.
+Added: As a result of the repayments to each Director, the Loan
+Added: Agreements terminated in accordance with their terms.
+Added: The closing of
+Added: the Private Placement occurred on August 7, 2020.
Pursuant to the Securities
1 unchanged sentence
$6.50 per Common Share, and a total of 3,415 shares with a conversion price of $6.50 per share and a stated value of $1,000 of
−Removed: Series C-1 convertible preferred stock (the “Series C-1 Preferred Shares”) and Series C-2 convertible preferred stock
−Removed: (the “Series C-2 Preferred Shares”), for an aggregate purchase price of $13.9 million in gross proceeds.
−Removed: The Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares are substantially the same, except the conversion of the Series C-2 Preferred Shares requires
−Removed: additional shareholder approval in accordance with Nasdaq listing rules.
−Removed: Ulf Rosberg and Peter Lindell, directors of Neonode, and Urban Forssell the
−Removed: Chief Executive Officer of Neonode (together, the “Insiders”) purchased an aggregate of $3.05 million of the Series
−Removed: C-2 Preferred Shares pursuant to the Securities Purchase Agreement.
−Removed: Further, pursuant
−Removed: to the Securities Purchase Agreement, Neonode agreed to issue an additional 1,034 shares of Series C-2 Preferred Shares to
−Removed: the Directors, Ulf Rosberg and Peter Lindell, to repay an aggregate of $1.03 million of outstanding indebtedness owed to them
−Removed: under Loan Agreements.
+Added: Series C-1 Preferred Stock and Series C-2 Preferred Stock, for an aggregate purchase price of $13.9 million in gross proceeds.
+Added: Ulf Rosberg and Peter Lindell, directors of Neonode, and Urban
+Added: Forssell the Chief Executive Officer of Neonode purchased an aggregate of $3.1 million of the Series C-2 Preferred Stock pursuant
+Added: to the Securities Purchase Agreement.
The net proceeds of
−Removed: the Private Placement will be used for working capital purposes.
−Removed: On August 6, 2020,
−Removed: in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series
−Removed: C-1 Preferred Shares by filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations (the “Series
−Removed: C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized
−Removed: and unissued preferred stock as Series C-2 Preferred Shares by filing a Series C-2 Certificate of Designation of Preferences, Rights
−Removed: and Limitations (the “Series C-2 Certificate of Designation”) with the Secretary of State of the State of Delaware.
−Removed: The Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares (together, the “Preferred Shares”) are convertible into 684,378 shares of Neonode
−Removed: common stock, subject to adjustment and limitations as provided in the Series C-1 Certificate of Designation and the Series C-2
−Removed: Certificate of Designation.
−Removed: The Series C-1 Preferred Shares and the Series C-2 Preferred Shares have no voting rights, however,
−Removed: under certain circumstances provided therein, the Company may not alter, change or amend the Series C-1 Certificate of Designation
−Removed: and Series C-2 Certificate of Designation without the affirmative vote of a majority of the then outstanding Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares, respectively.
−Removed: The holders of the Preferred Shares are entitled to receive dividends at
−Removed: the rate per share of 5% per annum, payable quarterly and on the conversion date.
−Removed: In the event of any liquidation, dissolution
−Removed: or winding-up of the Company, the holders of the Preferred Shares will participate pari passu with the holders of the Company’s
−Removed: common stock, on an as-converted basis.
−Removed: In connection with the Securities Purchase Agreement, Neonode
−Removed: entered into a Registration Rights Agreement (the “Registration Rights Agreement”) pursuant to which Neonode will file
−Removed: a registration statement with the SEC relating to the offer and sale by the holders of the Common Shares, and the shares of common
−Removed: stock underlying the Preferred Shares.
−Removed: Pursuant to the Registration Rights Agreement, Neonode is obligated to file the registration
−Removed: statement within 30 calendar days and to use reasonable best efforts to cause the registration statement to be declared effective
−Removed: within 75 calendar days or 105 calendar days in the case of a full review by the SEC.
−Removed: Failure to meet those and related obligations,
−Removed: or failure to maintain the effective registration of the Common Shares and the shares of common stock underlying the Preferred
−Removed: Shares will subject Neonode to payment for liquidated damages.
−Removed: In connection with the
−Removed: Private Placement, Neonode paid a fee to a placement agent of $659,070.
+Added: the Private Placement are being used for working capital purposes.
+Added: Pursuant to their terms
+Added: and the provisions of the Securities Purchase Agreement, the Series C-1 Preferred Stock and Series C-2 Preferred Stock (together,
+Added: the “Preferred Shares”) were converted into 684,378 shares of Neonode common stock.
+Added: The holders of the Preferred Shares
+Added: were entitled to receive dividends at the rate per share of 5% per annum, totaling $33,000.
+Added: As of September 30, 2020, $2,000 of
+Added: preferred dividends had been paid and $31,000 was accrued.
+Added: In connection with
+Added: the Securities Purchase Agreement, Neonode entered into a Registration Rights Agreement (the “Registration Rights Agreement”)
+Added: pursuant to which Neonode filed a registration statement with the Securities and Exchange Commission (the “SEC”) relating
+Added: to the offer and sale by the holders of the Common Shares, and the shares of common stock that were underlying the Preferred Shares.
+Added: Pursuant to the Registration Rights Agreement, Neonode was obligated to file the registration statement within 30 calendar days
+Added: and to use reasonable best efforts to cause the registration statement to be declared effective within 75 calendar days.
+Added: The registration
+Added: statement was declared effective by the SEC on September 18, 2020.
+Added: Failure to maintain the effective registration of the Common
+Added: Shares and the shares of common stock underlying the Preferred Shares will subject Neonode to payment for liquidated damages.
+Added: In connection with
+Added: the Private Placement, Neonode incurred total offering costs of $879,000.
The condensed consolidated
2 unchanged sentences
Management evaluated the significance
−Removed: of the Company’s operating loss and determined that the Company’s cash position after the August 2020 Private Placement,
−Removed: current operating plan and sources of potential capital would be sufficient to alleviate concerns about the Company’s ability
−Removed: to continue as a going concern.
+Added: of the Company’s operating loss and determined that the Company’s cash position after the Private Placement, current
+Added: operating plan and sources of potential capital would be sufficient to alleviate concerns about the Company’s ability to
+Added: continue as a going concern.
We expect our revenues
4 unchanged sentences
in meeting its revenue targets and reducing its operating loss.
−Removed: In the future,
−Removed: we may require sources of capital in addition to cash on hand to continue operations and to implement our strategy.
+Added: In the future, we may
+Added: require sources of capital in addition to cash on hand to continue operations and to implement our strategy.
If our operations
3 unchanged sentences
If adequate funds are not available
−Removed: on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on
−Removed: our business, results of operations and financial condition.
+Added: on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our
+Added: business, results of operations and financial condition.
In addition, if funds are available, the issuance of equity securities
20 unchanged sentences
The condensed consolidated
−Removed: balance sheets at June 30, 2020 and December 31, 2019 and the condensed consolidated statements of operations, comprehensive loss,
−Removed: stockholders’
−Removed: equity and cash flows for the three and six months ended June 30, 2020 and 2019 include our accounts and those
−Removed: of our wholly owned subsidiaries as well as Pronode Technologies AB.
+Added: balance sheets at September 30, 2020 and December 31, 2019 and the condensed consolidated statements of operations, comprehensive
+Added: loss, stockholders’
+Added: equity for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated
+Added: statements of cash flows for the nine months ended September 30, 2020 and 2019 include our accounts and those of our wholly owned
+Added: subsidiaries as well as Pronode Technologies AB.
Estimates and
31 unchanged sentences
The Swedish government
−Removed: provides insurance coverage up to 100,000 Euro per customer and covers deposits in all types of accounts.
−Removed: The Japanese government
−Removed: provides insurance coverage up to 10,000,000 Yen per customer.
−Removed: The Korea Deposit Insurance Corporation provides insurance coverage
−Removed: up to 50,000,000 Won per customer.
−Removed: The Central Deposit Insurance Corporation in Taiwan provides insurance coverage up to 3,000,000
−Removed: Taiwan Dollar per customer.
−Removed: At times, deposits held with financial institutions may exceed the amount of insurance provided.
−Removed: Accounts Receivable and Allowance for Doubtful
+Added: provides insurance coverage up to 950,000 Krona per customer and covers deposits in all types of accounts.
+Added: For bank accounts of
+Added: the category held by Neonode, the Japanese government provides full insurance coverage.
+Added: The Korea Deposit Insurance Corporation
+Added: provides insurance coverage up to 50,000,000 Won per customer.
+Added: The Central Deposit Insurance Corporation in Taiwan provides insurance
+Added: coverage up to 3,000,000 Taiwan Dollar per customer.
+Added: At times, deposits held with financial institutions may exceed the amount
+Added: of insurance provided.
+Added: Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable
8 unchanged sentences
experience with customers.
−Removed: Our allowance for doubtful accounts was approximately $85,000 as of June 30, 2020 and December 31, 2019,
−Removed: respectively.
+Added: Our allowance for doubtful accounts was approximately $82,000 as of September 30, 2020 and $85,000 as
+Added: of December 31, 2019.
Projects in Process
6 unchanged sentences
Costs capitalized
−Removed: in projects in process were $0 and $8,000 as of June 30, 2020 and December 31, 2019, respectively.
+Added: in projects in process were $11,000 and $8,000 as of September 30, 2020 and December 31, 2019, respectively.
Inventory is stated
14 unchanged sentences
In total, the AirBar
−Removed: reserve was $0.7 million and $0.8 million as of June 30, 2020 and December 31, 2019.
+Added: reserve was $0.7 million and $0.8 million as of September 30, 2020 and December 31, 2019, respectively.
The Company’s
4 unchanged sentences
goods are as follows (in thousands):
+Added: September 30,
Raw materials
8 unchanged sentences
We are not required to guarantee any obligations
−Removed: of the joint venture and there have been no operations of Neoeye through June 30, 2020.
+Added: of the joint venture and there have been no operations of Neoeye through September 30, 2020.
Property and Equipment
28 unchanged sentences
estimated, we may incur charges for impairment of these assets.
−Removed: As of June 30, 2020, we believe there was no impairment of
−Removed: our long-lived assets.
+Added: As of September 30, 2020, we believe there was no impairment
+Added: of our long-lived assets.
There can be no assurance, however, that market conditions will not change or sufficient demand for our
11 unchanged sentences
Foreign currency translation gains (losses) were $(228,000) and $(251,000) and
−Removed: and $(155,000) during the three and six months ended June 30, 2020 and 2019, respectively.
−Removed: Gains (losses) resulting from foreign
−Removed: currency transactions are included in general and administrative expenses in the accompanying condensed consolidated statements
−Removed: of operations and were $(63,000) and $(14,000) during the three and six months ended June 30, 2020, respectively, compared to $(57,000)
−Removed: and $114,000 during the same periods in 2019, respectively.
+Added: $(145,000) and $(300,000) during the three and nine months ended September 30, 2020 and 2019, respectively.
+Added: (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying condensed
+Added: consolidated statements of operations and were $(135,000) and $(149,000) during the three and nine months ended September 30, 2020,
+Added: respectively, compared to $56,000 and $170,000 during the same periods in 2019, respectively.
Concentration of Credit and Business Risks
Our customers are located in U.S., Europe
−Removed: As of June 30, 2020,
+Added: As of September 30,
2020, four customers represented approximately 75% of our consolidated accounts receivable and unbilled revenues.
1 unchanged sentence
2019, three customers represented approximately 72% of our consolidated accounts receivable and unbilled revenues.
−Removed: Customers who
−Removed: accounted for 10% or more of our net revenues during the three months ended June 30, 2020 are as follows:
−Removed: Epson –
+Added: Customers who accounted
+Added: for 10% or more of our net revenues during the three months ended September 30, 2020 are as follows:
Hewlett-Packard Company –
−Removed: ● Alpine –
+Added: LG Electronics Inc.
+Added: Seiko Epson Corporation –
+Added: Alpine Electronics, Inc –
Customers who accounted
−Removed: for 10% or more of our net revenues during the six months ended June 30, 2020 are as follows:
−Removed: Alpine –
−Removed: Epson –
+Added: for 10% or more of our net revenues during the nine months ended September 30, 2020 are as follows:
Hewlett-Packard Company –
−Removed: Customers who accounted for 10% or
−Removed: more of our net revenues during the three months ended June 30, 2019 are as follows:
+Added: Seiko Epson Corporation –
+Added: Alpine Electronics, Inc –
+Added: Customers who accounted
+Added: for 10% or more of our net revenues during the three months ended September 30, 2019 are as follows:
Hewlett Packard Company –
−Removed: Epson –
−Removed: Alpine –
−Removed: Bosch –
−Removed: Customers who accounted for 10% or more
−Removed: of our net revenues during the six months ended June 30, 2019 are as follows:
+Added: Seiko Epson Corporation –
+Added: Alpine Electronics, Inc –
+Added: Customers who accounted
+Added: for 10% or more of our net revenues during the nine months ended September 30, 2019 are as follows:
Hewlett Packard Company –
−Removed: Epson –
−Removed: Alpine –
−Removed: Bosch –
+Added: Seiko Epson Corporation –
+Added: Alpine Electronics, Inc –
Revenue Recognition
17 unchanged sentences
Revenues from our business
−Removed: areas derive from three different revenue streams, license fees, non-recurring engineering fees and the sale of sensor modules.
+Added: areas derive from three different revenue streams:
+Added: license fees, non-recurring engineering fees and the sale of sensor modules.
Licensing Revenues:
13 unchanged sentences
Explicit return rights are not offered to
−Removed: There have been no returns through June 30, 2020.
+Added: There have been no returns through September 30, 2020.
Engineering Services:
26 unchanged sentences
all SOW projects are recognized in full as soon as they become evident.
−Removed: During the three and six months ended June 30, 2020 and
−Removed: 2019, no losses related to SOW projects were recorded.
+Added: During the three and nine months ended September 30, 2020
+Added: and 2019, no losses related to SOW projects were recorded.
Optical Sensor Modules
7 unchanged sentences
return and warranty provisions.
−Removed: The timing of revenue
−Removed: recognition related to AirBar modules depends upon how each sale is transacted - either point-of-sale or through distributors.
−Removed: We recognize revenue for AirBar modules sold point-of-sale (online sales and other direct sales to customers) when we provide the
−Removed: promised product to the customer.
Because we generally
6 unchanged sentences
from us, and the distributors have significant risks and rewards of ownership of products purchased.
−Removed: Distributors participate
−Removed: in various cooperative marketing and other incentive programs, and we maintain estimated accruals and allowances for these programs.
−Removed: If actual credits received by distributors under these programs were to deviate significantly from our estimates, which are based
−Removed: on historical experience, our revenue could be adversely affected.
GAAP, companies
may make reasonable aggregations and approximations of returns data to accurately estimate returns.
−Removed: Our AirBar returns and warranty
−Removed: experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales
−Removed: involve homogenous transactions.
−Removed: The reserve for future sales returns is recorded as a reduction of our accounts receivable and
−Removed: revenue and was insignificant as of June 30, 2020 and 2019.
−Removed: If the actual future returns were to deviate from the historical data
−Removed: on which the reserve had been established, our revenue could be adversely affected.
+Added: Our sensor modules returns
+Added: and warranty experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product
+Added: sales involve homogenous transactions.
+Added: The reserve for future sales returns is recorded as a reduction of our accounts receivable
+Added: and revenue and was insignificant as of September 30, 2020 and 2019.
+Added: If the actual future returns were to deviate from the historical
+Added: data on which the reserve had been established, our revenue could be adversely affected.
The following tables
−Removed: present disaggregated revenues by market for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):
+Added: present disaggregated revenues by market for the three and nine months ended September 30, 2020 and 2019 (dollars in thousands):
Three months ended
−Removed: June 30, 2020
+Added: September 30,
Three months ended
−Removed: June 30, 2019
+Added: September 30,
HMI Solutions
4 unchanged sentences
Net revenues from distributors and other
−Removed: Six months ended
−Removed: June 30, 2020
−Removed: Six months ended
−Removed: June 30, 2019
+Added: Nine months ended
+Added: September 30,
+Added: Nine months ended
+Added: September 30,
HMI Solutions
21 unchanged sentences
if it is probable that a significant reversal of any incremental revenue would occur.
−Removed: Judgment is further required to
−Removed: determine the amount of unbilled license fees at the end of each reporting period.
+Added: Judgment is further required to determine
+Added: the amount of unbilled license fees at the end of each reporting period.
Contract Balances
5 unchanged sentences
The following table presents accounts receivable
−Removed: and deferred revenues as of June 30, 2020 and December 31, 2019 (in thousands):
+Added: and deferred revenues as of September 30, 2020 and December 31, 2019 (in thousands):
+Added: September 30,
Accounts receivable and unbilled revenue
20 unchanged sentences
Our allowance for doubtful accounts
−Removed: was approximately $85,000 as of June 30, 2020 and December 31, 2019.
+Added: was approximately $82,000 as of September 30, 2020 and $85,000 as of December 31, 2019.
Payment terms and conditions
15 unchanged sentences
summarizes the activity related to the product warranty liability (in thousands):
+Added: September 30,
Balance at beginning of period
−Removed: for warranty issued
−Removed: Balance at end of
+Added: Provisions for warranty issued
+Added: Balance at end of period
The Company accrues
15 unchanged sentences
presents our deferred revenues (in thousands):
+Added: September 30,
Deferred revenues HMI Solutions
1 unchanged sentence
During the three and
−Removed: six months ended June 30, 2020, the Company recognized revenues of approximately $6,000 and $32,000, respectively, related to contract
−Removed: liabilities outstanding at the beginning of the year.
+Added: nine months ended September 30, 2020, the Company recognized revenues of approximately $7,000 and $39,000, respectively, related
+Added: to contract liabilities outstanding at the beginning of the year.
+Added: Product Backlog
+Added: Our sensor module product backlog at September 30, 2020 was
+Added: approximately $495,000.
+Added: The product backlog includes orders confirmed for products planned to be shipped within the next 3 quarters
+Added: to 3 customers.
+Added: Our cycle time between order and shipment is generally short and customers occasionally change delivery schedules.
+Added: As a result, we do not believe that our product backlog, as of any particular date, is necessarily indicative of actual product
+Added: revenue for any future period.
Advertising costs are
expensed as incurred.
−Removed: Advertising costs for the three and six months ended June 30, 2020 and 2019 amounted to approximately $9,000
+Added: Advertising costs for the three and nine months ended September 30, 2020 and 2019 amounted to approximately
$27,000 and $43,000 and $18,000 and $66,000, respectively.
47 unchanged sentences
Based on the uncertainty
−Removed: of future pre-tax income, we fully reserved our net deferred tax assets as of June 30, 2020 and December 31, 2019.
−Removed: we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax
−Removed: asset would increase income in the period such determination was made.
+Added: of future pre-tax income, we fully reserved our net deferred tax assets as of September 30, 2020 and December 31, 2019.
+Added: event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred
+Added: tax asset would increase income in the period such determination was made.
The provision for income taxes represents the net change
4 unchanged sentences
As a result, we did not recognize a liability for unrecognized tax benefits.
+Added: As of September
30, 2020, and December 31, 2019, we had no unrecognized tax benefits.
1 unchanged sentence
Net loss per share
−Removed: amounts has been computed based on the weighted average number of shares of common stock outstanding during the three and six months
−Removed: ended June 30, 2020 and 2019, respectively.
−Removed: Net loss per share, assuming dilution amounts from common stock equivalents, is computed
−Removed: based on the weighted-average number of shares of common stock and potential common stock equivalents outstanding during the period.
−Removed: The weighted-average number of shares of common stock and potential common stock equivalents used in computing the net loss per
−Removed: share for the three and six months ended June 30, 2020 and 2019 exclude the potential common stock equivalents, as the effect would
−Removed: be anti-dilutive (see Note 9).
+Added: amounts has been computed based on the weighted average number of shares of common stock outstanding during the three and nine
+Added: months ended September 30, 2020 and 2019, respectively.
+Added: Net loss per share, assuming dilution amounts from common stock equivalents,
+Added: is computed based on the weighted-average number of shares of common stock and potential common stock equivalents outstanding during
+Added: The weighted-average number of shares of common stock and potential common stock equivalents used in computing the
+Added: net loss per share for the three and nine months ended September 30, 2020 and 2019 exclude the potential common stock equivalents,
+Added: as the effect would be anti-dilutive (see Note 9).
Other Comprehensive Income (Loss)
9 unchanged sentences
The weighted-average exchange rate for the condensed consolidated statements of operations was as follows:
−Removed: Six months ended
+Added: Nine months ended
+Added: September 30,
Swedish Krona
3 unchanged sentences
sheets was as follows:
+Added: September 30,
Swedish Krona
34 unchanged sentences
statements of operations has been changed accordingly.
−Removed: Revenues from HMI Solutions include license fees and non-recurring
−Removed: engineering fees while HMI Products include sensor module sales and non-recurring engineering fees.
−Removed: We believe that future revenues
−Removed: from Remote Sensing Solutions will include license fees and non-recurring engineering fees.
+Added: Revenues from HMI Solutions include license fees and non-recurring engineering
+Added: fees while HMI Products include sensor module sales and non-recurring engineering fees.
+Added: We expect that future revenues within our
+Added: Remote Sensing Solutions business area will be derived from license fees and non-recurring engineering fees.
Short-Term Borrowings
−Removed: During the six months
−Removed: ended June 30, 2020, the Company was granted a credit from the Swedish Tax Authority covering social charges and staff withholding
+Added: During the nine months
+Added: ended September 30, 2020, the Company was granted a credit from the Swedish Tax Authority covering social charges and staff withholding
taxes relating to January through March 2020 payroll, as part of Swedish governmental COVID-19 support.
−Removed: The total amount is $563,000
−Removed: and the credit is for 12 months but can be repaid earlier if desired.
−Removed: There is a 1.25% annual non-deductible interest and a credit
−Removed: fee of 0.2% from the seventh month of the granted credit.
−Removed: On June 17, 2020,
−Removed: the Company entered into short-term loan facilities (the “Loan Agreements”) with entities beneficially owned by
−Removed: each of Ulf Rosberg and Peter Lindell, directors of Neonode (the “Directors”).
−Removed: Pursuant to the Loan Agreements,
−Removed: each entity owned by the Director made approximately $1.7 million in U.S.
+Added: The total amount was $563,000
+Added: and the credit was for 12 months but could be repaid earlier if desired.
+Added: There was a 1.25% annual non-deductible interest and a
+Added: credit fee of 0.2% from the seventh month of the granted credit.
+Added: The tax credit was repaid in August 2020 along with interest of
+Added: On June 17, 2020, the Company entered into short-term loan facilities
+Added: (the “Loan Agreements”) with two entities beneficially owned respectively by each of Ulf Rosberg and Peter Lindell,
+Added: directors of Neonode (each, a “Director”).
+Added: Pursuant to the Loan Agreements, each entity beneficially owned by the Director
+Added: made approximately $1.7 million in U.S.
dollars principal amount available to the Company.
−Removed: Subsequent to entering into the Loan Agreements, the Company made an initial drawdown of an aggregate of approximately $1.0
−Removed: Each of the Loan Agreements provides for
−Removed: a credit fee of 0.75% per annum, calculated on a daily basis from the date of the Loan Agreement, and any outstanding amount incurs
−Removed: interest at a fixed rate of 3.25% per annum, calculated on a daily basis from the drawdown date.
−Removed: Drawdowns under the Loan Agreements
−Removed: will be unavailable upon the earlier to occur of the execution of a capital raise by Neonode or December 31, 2020.
−Removed: If the Company
−Removed: completes a capital raise before December 31, 2020, any outstanding amount under the Loan Agreements, including any credit fee
−Removed: and interest, becomes payable as soon as practicably possible after such capital raise.
−Removed: If a capital raise is not completed by
−Removed: December 31, 2020, or if the funds from the capital raise are insufficient to repay the full outstanding amount under the Loan
−Removed: Agreements, then the outstanding amount under the Loan Agreements, including any credit fee and interest, is due and payable on
−Removed: February 28, 2021.
−Removed: 2020, Neonode completed the above-mentioned capital raise and issued 1,034 shares of the Company’s Preferred Shares to
−Removed: the entities owned by the Directors, Ulf Rosberg and Peter Lindell, to repay the indebtedness and accrued interest.
−Removed: As a result, the related Loan Agreements
−Removed: were terminated in accordance with their terms.
+Added: The Company made an initial drawdown
+Added: of an aggregate of approximately $1.0 million under the Loan Agreement.
+Added: Each of the Loan Agreements provided for a credit fee of 0.75%
+Added: per annum, calculated on a daily basis from the date of the Loan Agreement, and any outstanding amount incurred interest at a fixed
+Added: rate of 3.25% per annum, calculated on a daily basis from the drawdown date.
+Added: Drawdowns under the Loan Agreements became unavailable
+Added: upon the earlier to occur of the execution of a capital raise by Neonode or December 31, 2020.
+Added: Upon completion of a capital raise
+Added: before December 31, 2020, any outstanding amount under the Loan Agreements, including any credit fee and interest, became payable
+Added: as soon as practicably possible after such capital raise.
+Added: If a capital raise was not completed by December 31, 2020, or if the
+Added: funds from the capital raise were insufficient to repay the full outstanding amount under the Loan Agreements, then the outstanding
+Added: amount under the Loan Agreements, including any credit fee and interest, would have become due and payable on February 28, 2021.
+Added: On August 7, 2020, Neonode issued 517 shares of Series C-2 Preferred
+Added: Stock to UMR Invest AB, the entity beneficially owned by Ulf Rosberg, to repay the indebtedness and accrued interest under the
+Added: Loan Agreement.
+Added: To effect a similar transaction with entities beneficially owned by the other Director, Peter Lindell, (i) on August
+Added: 7, 2020, at the closing of the Private Placement, Cidro Förvaltning AB paid for an additional 517 shares of Series C-2 Preferred
+Added: Stock, and (ii) on August 10, 2020, the next business day after the closing of the Private Placement, Neonode repaid to Cidro Holding
+Added: AB the debt and accrued interest due under the Loan Agreement, an amount that equaled the price of the 517 shares of Series C-2
+Added: Preferred Stock.
+Added: As a result of the repayments to each Director, the Loan Agreements terminated in accordance with their terms.
Stockholders’
−Removed: During the three and
−Removed: six months ended June 30, 2020, there were no activities that affected common stock.
+Added: See Note 1 for activities
+Added: that affected common stock during the three and nine months ended September 30, 2020.
+Added: At the Annual Meeting of our Company held on September 29, 2020,
+Added: stockholders approved a proposal to increase the number of authorized common stock to 25,000,000 shares.
+Added: Accordingly, on November
+Added: 5, 2020, we filed an amendment to the Neonode Inc.
+Added: Restated Certificate of Incorporation, as amended (our “Certificate of
+Added: Incorporation”), with the Secretary of State of the State of Delaware to increase to 25,000,000 the number of authorized
+Added: shares of our common stock.
Preferred Stock
−Removed: As of June 30, 2020,
−Removed: we had one class of preferred stock.
−Removed: There were no activities that affected preferred stock during the three and six months ended
−Removed: June 30, 2020.
−Removed: On August 6, 2020,
−Removed: in connection with the closing of a private placement, the Company designated (i) 365 shares of its authorized and unissued preferred
−Removed: stock as Series C-1 Preferred Shares by filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations (the
−Removed: “Series C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware and (ii) 4,084 shares
−Removed: of its authorized and unissued preferred stock as Series C-2 Preferred Shares by filing a Series C-2 Certificate of Designation
−Removed: of Preferences, Rights and Limitations (the “Series C-2 Certificate of Designation”) with the Secretary of State of
−Removed: the State of Delaware.
+Added: On August 6, 2020, in connection with the closing of the Private
+Added: Placement, the Company designated (i) 365 shares of its authorized and unissued preferred stock as Series C-1 Preferred Stock by
+Added: filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State
+Added: of Delaware and (ii) 4,084 shares of its authorized and unissued preferred stock as Series C-2 Preferred Stock by filing a Series
+Added: C-2 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware.
The Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares (together, the “Preferred Shares”) are convertible into 684,378 shares of Neonode
−Removed: common stock, subject to adjustment and limitations as provided in the Series C-1 Certificate of Designation and the Series C-2
−Removed: Certificate of Designation.
−Removed: The holders of the Preferred Shares are entitled to receive
−Removed: dividends at the rate per share of 5% per annum, payable quarterly and on the conversion date.
−Removed: In the event of any liquidation,
−Removed: dissolution or winding-up of the Company, the holders of the Preferred Shares will participate pari passu with the holders of the
−Removed: Company’s common stock, on an as-converted basis.
−Removed: As of June 30, 2020
+Added: Stock and Series C-2 Preferred Stock (together, the “Preferred Shares”) were converted into 684,378 shares of Neonode
+Added: common stock.
+Added: As of September 30, 2020, our Certificate of Incorporation authorized
+Added: Series A Preferred Stock, Series B Preferred Stock, Series C-1 Preferred Stock, and Series C-2 Preferred Stock.
+Added: During the year ended
+Added: December 31, 2019, the only shares of our preferred stock issued and outstanding were Series B Preferred Stock.
+Added: Effective July
+Added: 1, 2019, all outstanding shares of our Series B Preferred Stock were converted into shares of our common stock.
+Added: The holders of the Preferred Shares were entitled to receive
+Added: dividends at the rate per share of 5% per annum, totaling $33,000.
+Added: As of September 30, 2020, $2,000 of preferred dividends had
+Added: been paid and $31,000 was accrued.
+Added: No shares of preferred stock were
+Added: issued and outstanding as of September 30, 2020.
+Added: Details of the preferred stock activities
+Added: are set forth below:
+Added: Series B Preferred Stock Shares Issued
+Added: Series B Preferred Stock Amount
+Added: Series C-1 Preferred Stock Shares Issued
+Added: Series C-1 Preferred Stock Amount
+Added: Series C-2 Preferred Stock Shares Issued
+Added: Series C-2 Preferred Stock Amount
+Added: Balances, December 31, 2018
+Added: Balances, March 31, 2019
+Added: Conversion of Series B Preferred Stock to common stock
+Added: Balances, June 30, 2019
+Added: Conversion of Series B Preferred Stock to common stock
+Added: Balances, September 30, 2019
+Added: Balances, December 31, 2019
+Added: Balances, March 31, 2020
+Added: Balances, June 30, 2020
+Added: Issuance of Preferred Shares for cash
+Added: Series C-2 Preferred Stock issued for repayment of short-term borrowings and accrued interest
+Added: Conversion of Preferred Shares to common stock
+Added: Balances, September 30, 2020
+Added: As of September 30,
2020 and December 31, 2019, the Company had 431,368 warrants to purchase common stock outstanding.
Stock-Based Compensation
−Removed: There was no stock-based
−Removed: compensation expense for the three and six months ended June 30, 2020 and 2019 and there is no remaining unrecognized expense related
−Removed: to stock options as of June 30, 2020.
+Added: stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019 and there is no remaining
+Added: unrecognized stock-based compensation expense related to stock options as of September 30, 2020.
The estimated fair
21 unchanged sentences
All of our outstanding stock options and restricted stock awards are classified as equity instruments.
−Removed: As of June 30, 2020, we had two equity incentive
+Added: As of September 30, 2020, we had three equity
+Added: incentive plans:
The 2006 Equity Incentive Plan (the “2006 Plan”);
The 2015 Stock Incentive Plan (the “2015 Plan”);
+Added: The 2020 Stock Incentive Plan (the “2020 Plan”).
Both the 2006 Plan and the 2015 Plan have
5 unchanged sentences
Outstanding at January 1, 2020
−Removed: Outstanding at June 30, 2020
−Removed: The aggregate intrinsic
−Removed: value of the 51,500 stock options that are outstanding, vested and expected to vest as of June 30, 2020 was $0.
−Removed: For the three and six
−Removed: months ended June 30, 2020 and 2019, we recorded no compensation expense related to the vesting of stock options.
−Removed: The fair value
−Removed: of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the date of grant of the stock
−Removed: During the three and
−Removed: six months ended June 30, 2020, we did not grant any options to purchase shares of our common stock to employees or members of
−Removed: our board of directors.
−Removed: Stock options granted
−Removed: under the 2006 and 2015 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments
−Removed: 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
+Added: Outstanding at September 30, 2020
+Added: The aggregate
+Added: intrinsic value of the 10,500 stock options that are outstanding, vested and expected to vest as of September 30, 2020 was $0.
+Added: For the three
+Added: and nine months ended September 30, 2020 and 2019, we recorded no compensation expense related to the vesting of stock options.
+Added: The fair value of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the date of grant
+Added: of the stock option.
+Added: the three and nine months ended September 30, 2020, we did not grant any options to purchase shares of our common stock to employees
+Added: or members of our board of directors.
+Added: options granted under the 2006 and 2015 Plans are exercisable over a maximum term of ten years from the date of grant, vest in
+Added: various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common
+Added: stock on the date of grant.
Commitments and Contingencies
+Added: August 26, 2020, a putative stockholder of Neonode filed a purported class action lawsuit (C.A.
+Added: 2020-0701-AGB) in the Delaware
+Added: Court of Chancery against Neonode and the Board of Directors of Neonode for alleged breach of fiduciary duty in connection with
+Added: disclosure of information concerning Proposal 5 and Proposal 6 in the proxy statement filed with the SEC by Neonode on August
+Added: 20, 2020 for the 2020 Annual Meeting of Stockholders of Neonode (the “Proxy Statement”).
+Added: These proposals for
+Added: shareholder approval related to the Private Placement by Neonode on August 5, 2020 in which two directors and the chief executive
+Added: officer of Neonode participated.
+Added: The relief sought by the plaintiff included a preliminary injunction to enjoin the stockholder
+Added: votes on Proposal 5 and Proposal 6.
+Added: On September 13, 2020, the plaintiff amended his complaint to also enjoin the stockholder
+Added: vote on Proposal 1 in the Proxy Statement concerning election of directors.
+Added: the other named defendants believe that the disclosures set forth in the Proxy Statement complied fully with all applicable law,
+Added: that no supplemental disclosure was required, and that the plaintiffs’
+Added: allegations are without merit.
+Added: However, in an effort
+Added: to avoid the nuisance and ongoing expense relating to the claims in the lawsuit, Neonode filed definitive additional materials
+Added: to the Proxy Statement on September 18, 2020.
+Added: The plaintiff withdrew his motion to preliminarily enjoin the stockholder votes
+Added: on Proposals 1, 5, and 6 based upon the definitive additional materials to the Proxy Statement.
+Added: The lawsuit remains subject to
+Added: final disposition, including the potential award of fees to the attorneys for the plaintiff.
+Added: September 2, 2020, a separate putative stockholder of Neonode filed a purported class action lawsuit (Case No.
+Added: 1:20-cv-01174-UNA)
+Added: in the United States District Court for the District of Delaware against Neonode, the Board of Directors of Neonode, and the Chief
+Added: Executive Officer of Neonode for alleged violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended,
+Added: in connection with disclosure of information concerning Proposal 5 and Proposal 6 in the Proxy Statement, and generally containing
+Added: the same substantive allegations as in the above previously-filed Delaware Court of Chancery action.
+Added: On October 20, 2020, the
+Added: plaintiff voluntarily dismissed the lawsuit in the United States District Court.
+Added: expenses for the three and nine months ended September 30, 2020 include actual and estimated costs in relation to the above-referenced
Indemnities and Guarantees
−Removed: Our bylaws require
−Removed: that we indemnify each of our executive officers and directors for certain events or occurrences arising because of the officer
−Removed: or director serving in such capacity.
−Removed: The term of the indemnification period is for the officer’s or director’s lifetime.
−Removed: The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited.
+Added: bylaws require that we indemnify each of our executive officers and directors for certain events or occurrences arising because
+Added: of the officer or director serving in such capacity.
+Added: The term of the indemnification period is for the officer’s or director’s
+Added: The maximum potential amount of future payments we could be required to make under these indemnification agreements
+Added: is unlimited.
However, we have a directors’
and officers’
−Removed: liability insurance policy that should enable us to recover a portion of
−Removed: future amounts paid.
+Added: liability insurance policy that should enable us to recover
+Added: a portion of future amounts paid.
As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification
−Removed: agreements is minimal and we have no liabilities recorded for these agreements as of June 30, 2020 and December 31, 2019.
−Removed: We enter into indemnification
−Removed: provisions under our agreements with other companies in the ordinary course of business, typically with business partners, contractors,
−Removed: customers and landlords.
−Removed: Under these provisions we generally indemnify and hold harmless the indemnified party for losses suffered
−Removed: or incurred by the indemnified party as a result of our activities or, in some cases, as a result of the indemnified party’s
−Removed: activities under the agreement.
−Removed: These indemnification provisions often include indemnifications relating to representations made
−Removed: by us regarding intellectual property rights.
−Removed: These indemnification provisions generally survive termination of the underlying
−Removed: The maximum potential amount of future payments we could be required to make under these indemnification provisions
−Removed: is unlimited.
−Removed: We have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.
+Added: agreements is minimal and we have no liabilities recorded for these agreements as of September 30, 2020 and December 31, 2019.
+Added: enter into indemnification provisions under our agreements with other companies in the ordinary course of business, typically
+Added: with business partners, contractors, customers and landlords.
+Added: Under these provisions we generally indemnify and hold harmless
+Added: the indemnified party for losses suffered or incurred by the indemnified party as a result of our activities or, in some cases,
+Added: as a result of the indemnified party’s activities under the agreement.
+Added: These indemnification provisions often include indemnifications
+Added: relating to representations made by us regarding intellectual property rights.
+Added: These indemnification provisions generally survive
+Added: termination of the underlying agreement.
+Added: The maximum potential amount of future payments we could be required to make under these
+Added: indemnification provisions is unlimited.
+Added: We have not incurred material costs to defend lawsuits or settle claims related to these
+Added: indemnification agreements.
As a result, we believe the estimated fair value of these agreements is minimal.
−Removed: Accordingly, we have no liabilities recorded for
−Removed: these indemnification provisions as of June 30, 2020 and December 31, 2019.
−Removed: One of our manufacturing
−Removed: partners has previously purchased material for the final assembly of AirBars.
−Removed: To protect the manufacturer from losses in relation
−Removed: to AirBar production, we agreed to secure the value of the inventory in a bank guarantee.
−Removed: The initial guarantee was for $345,000
−Removed: and valid until December 31, 2019.
−Removed: Since the sale of AirBars has been lower than expected, a major part of the inventory at the
−Removed: manufacturer remained unused when the due date of the bank guarantee neared.
−Removed: In November 2019, we
−Removed: agreed to purchase the excess AirBar inventory for approximately $141,000 and in conjunction with this, the bank guarantee was
−Removed: decreased to $210,000 and is valid until December 31, 2020.
+Added: Accordingly, we have
+Added: no liabilities recorded for these indemnification provisions as of September 30, 2020 and December 31, 2019.
+Added: of our manufacturing partners has previously purchased material for the final assembly of AirBars.
+Added: To protect the manufacturer
+Added: from losses in relation to AirBar production, we agreed to secure the value of the inventory in a bank guarantee.
+Added: guarantee was for $345,000 and valid until December 31, 2019.
+Added: Since the sale of AirBars has been lower than expected, a major
+Added: part of the inventory at the manufacturer remained unused when the due date of the bank guarantee neared.
+Added: November 2019, we agreed to decreased the bank guarantee to $210,000, covering the value of inventory for the production of 20,000
+Added: AirBars and in conjunction with this purchase the excess AirBar inventory for approximately $141,000.
+Added: The current bank guarantee
+Added: is valid until December 31, 2020.
Management’s
1 unchanged sentence
have to purchase the inventory.
−Removed: As of August 14, 2020, management’s judgment is that we will sell the remaining AirBars during
−Removed: 2020 and thereby purchase the components and the assembly service from the manufacturing partner throughout the year.
−Removed: has been recorded for the period ended June 30, 2020.
+Added: As of November 10, 2020, management’s judgment is that we will sell the remaining AirBars
+Added: during 2020 and 2021 and thereby purchase the components and the assembly service from the manufacturing partner throughout the
+Added: The bank guarantee is expected to be renewed at a lower amount reflecting the value of the remaining inventory at year-end.
+Added: No liability has been recorded for the period ended September 30, 2020.
Patent Assignment
On May 6, 2019, the
−Removed: Company assigned a portfolio of patents to Aequitas Technologies LCC.
−Removed: The portfolio contains two patent families comprising nine
+Added: Company assigned a portfolio of patents to Aequitas Technologies LCC (“Aequitas”).
+Added: The portfolio contains two patent
+Added: families comprising nine U.S.
patents, five non-U.S.
1 unchanged sentence
patent applications.
−Removed: The assignment provides the Company the right to
−Removed: share potential proceeds generated from a licensing and monetization program.
−Removed: As per June 30, 2020 there has been no proceeds from
−Removed: the agreement.
−Removed: On June 8, 2020, Neonode
−Removed: Smartphone LLC, a subsidiary of Aequitas Technologies LLC, filed patent infringement lawsuits against Apple Inc., and Samsung Electronics
−Removed: and Samsung Electronics America, Inc., respectively, in Western District of Texas, USA.
+Added: The assignment provides
+Added: the Company the right to share potential proceeds generated from a licensing and monetization program.
+Added: As of September 30, 2020,
+Added: there have been no proceeds from the agreement with Aequitas.
On July 11, 2020, Aequitas
−Removed: assigned 10 patents belonging to the one of the patent families back to Neonode as they decided not to enforce them.
+Added: assigned 10 patents belonging to the one of the patent families back to Neonode based upon a determination by Aequitas not to enforce
+Added: those particular patents.
+Added: On September 8, 2020,
+Added: an Aequitas subsidiary, Neonode Smartphone LLC, filed patent infringement lawsuits against Apple Inc., and Samsung Electronics
+Added: and Samsung Electronics America, Inc., in U.S.
+Added: federal court in the Western District of Texas.
Non-Recurring Engineering Development
5 unchanged sentences
engineering costs at the rate of $0.25 per ASIC for each of the first 2 million ASICs sold.
−Removed: As of June 30, 2020, we had made no
−Removed: payments to TI under the NN1002 Agreement.
+Added: As of September 30, 2020, we had made
+Added: no payments to TI under the NN1002 Agreement.
Segment Information
1 unchanged sentence
segment, which is comprised of the touch technology licensing and sensor module business.
−Removed: All of our sales for the three and six
−Removed: months ended June 30, 2020 and 2019, respectively, were to customers located in the U.S., Europe and Asia.
+Added: All of our sales for the three and nine
+Added: months ended September 30, 2020 and 2019, respectively, were to customers located in the U.S., Europe and Asia.
The Company reports
1 unchanged sentence
The following table
−Removed: presents net revenues by geographic area for the three and six months ended June 30, 2020 and 2019, respectively, (dollars in thousands):
+Added: presents net revenues by geographic area for the three and nine months ended September 30, 2020 and 2019, respectively, (dollars
+Added: in thousands):
Three months ended
−Removed: June 30, 2020
+Added: September 30,
Three months ended
−Removed: June 30, 2019
+Added: September 30,
United States
−Removed: Six months ended
−Removed: June 30, 2020
−Removed: Six months ended
−Removed: June 30, 2019
+Added: Nine months ended
+Added: September 30,
+Added: Nine months ended
+Added: September 30,
United States
The following table presents our total assets
−Removed: by geographic region as of June 30, 2020 and December 31, 2019 (in thousands):
+Added: by geographic region as of September 30, 2020 and December 31, 2019 (in thousands):
+Added: September 30,
We have operating leases
1 unchanged sentence
Our leases have remaining lease terms
−Removed: of three months to 2.25 years, and our two primary operating leases include options to extend the leases for one to three years.
−Removed: Those operating leases also include options to terminate the leases within one year.
−Removed: Future renewal options that are not likely
−Removed: to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.
−Removed: Our corporate
−Removed: office lease is automatically renewed at a cost increase of 2% on a yearly basis unless we provide written notice three months
−Removed: prior to expiration date.
+Added: of two months to 2.42 years, and one of our two primary operating leases includes an option to extend the lease for another three
+Added: This primary operating lease also includes an option to terminate the lease by October 1, 2021.
+Added: The other primary operating
+Added: lease has been terminated effective November 30, 2020 and a new lease has been signed for three years beginning December 1, 2020.
+Added: Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and
+Added: related lease liabilities.
We report operating
−Removed: leased assets, as well as operating lease current and noncurrent obligations on our balance sheets for the right to use those buildings
−Removed: in our business.
+Added: lease assets, as well as operating lease current and noncurrent obligations on our consolidated balance sheets for the right to
+Added: use those buildings in our business.
Our finance leases represent manufacturing equipment.
−Removed: We report the manufacturing equipment, as well as finance
−Removed: lease current and noncurrent obligations on our balance sheets.
+Added: We report the manufacturing equipment,
+Added: as well as finance lease current and noncurrent obligations on our consolidated balance sheets.
Generally, interest
6 unchanged sentences
expense were as follows (in thousands):
−Removed: Six Months Ended
+Added: September 30,
+Added: Nine Months Ended
+Added: September 30,
Operating lease cost (1)
3 unchanged sentences
Total finance lease cost
−Removed: short term lease costs of $27,000 and $51,000 for the three and six months ended June 30, 2020, respectively.
−Removed: Three Months Ended
−Removed: Six Months Ended
+Added: Includes short term lease costs of $30,000 and $81,000 for the three and nine months ended September 30, 2020, respectively.
+Added: September 30,
+Added: September 30,
Operating lease cost (1)
3 unchanged sentences
Total finance lease cost
−Removed: short term lease costs of $32,000 and $66,000 for the three and six months ended June 30, 2019, respectively.
+Added: Includes short term lease costs of $27,000 and $93,000 for the three and nine months ended September 30, 2019, respectively.
Supplemental cash flow
information related to leases was as follows (in thousands):
−Removed: Three Months Ended
−Removed: Six Months Ended
+Added: September 30,
+Added: September 30,
Cash paid for amounts included in leases:
4 unchanged sentences
Operating leases
−Removed: Three months ended
−Removed: Six months ended
+Added: September 30,
+Added: September 30,
Cash paid for amounts included in leases:
6 unchanged sentences
sheet information related to leases was as follows (in thousands):
+Added: September 30,
Operating leases
10 unchanged sentences
Total finance lease liabilities
+Added: September 30,
Weighted Average Remaining Lease Term
4 unchanged sentences
Finance leases
−Removed: adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019
+Added: Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
A summary of future
−Removed: minimum payments under non-cancellable operating lease commitments as of June 30, 2020 is as follows (in thousands):
+Added: minimum payments under non-cancellable operating lease commitments as of September 30, 2020 is as follows (in thousands):
Years ending December 31,
3 unchanged sentences
The following is a
−Removed: schedule of minimum future rentals on the non-cancellable finance leases as of June 30, 2020 (in thousands):
+Added: schedule of minimum future rentals on the non-cancellable finance leases as of September 30, 2020 (in thousands):
Year ending December 31,
6 unchanged sentences
Basic net loss per
−Removed: common share for the three and six months ended June 30, 2020 and 2019 was computed by dividing the net loss attributable to Neonode
+Added: common share for the three and nine months ended September 30, 2020 and 2019 was computed by dividing the net loss attributable
+Added: to common shareholders of Neonode Inc.
for the relevant period by the weighted average number of shares of common stock outstanding.
−Removed: Diluted loss per common share
−Removed: is computed by dividing net loss attributable to Neonode Inc.
−Removed: by the weighted average number of shares of common stock and common
−Removed: stock equivalents outstanding.
+Added: Diluted loss per common share is computed by dividing net loss attributable to common shareholders of Neonode Inc.
+Added: by the weighted
+Added: average number of shares of common stock and common stock equivalents outstanding.
Potential common stock
−Removed: equivalents of approximately 0 and 0 outstanding stock options and 0 million and 0.3 million outstanding stock warrants under the
−Removed: treasury stock method, and 0 and 11,000 shares issuable upon conversion of preferred stock are excluded from the diluted earnings
−Removed: per share calculation for the three and six months ended June 30, 2020 and 2019, respectively, due to their anti-dilutive effect.
+Added: equivalents of approximately 0 and 0 outstanding stock options and 0 and 0.3 million outstanding stock warrants under the treasury
+Added: stock method, and 0 and 0 shares issuable upon conversion of preferred stock are excluded from the diluted earnings per share calculation
+Added: for the three and nine months ended September 30, 2020 and 2019, respectively, due to their anti-dilutive effect.
(in thousands, except per share amounts)
Three months ended
+Added: September 30,
BASIC AND DILUTED
Weighted average number of common shares outstanding
−Removed: Net loss attributable to Neonode Inc.
+Added: Net loss attributable to common shareholders of Neonode Inc.
Net loss per share - basic and diluted
(in thousands, except per share amounts)
−Removed: Six months ended
+Added: Nine months ended
+Added: September 30,
BASIC AND DILUTED
Weighted average number of common shares outstanding
−Removed: Net loss attributable to Neonode Inc.
+Added: Net loss attributable to common shareholders of Neonode Inc.
Net loss per share - basic and diluted
15 unchanged sentences
germ-free contactless touch on any surface.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations
−Removed: Looking Statements
−Removed: Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
−Removed: as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation
−Removed: Reform Act of 1995.
+Added: Management’s Discussion
+Added: and Analysis of Financial Condition and Results of Operations
+Added: Forward Looking Statements
+Added: This Quarterly Report
+Added: on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
+Added: Section 21E of the Securities Exchange Act of 1934, as amended, adopted pursuant to the Private Securities Litigation Reform Act
Statements that are not purely historical may be forward-looking.
−Removed: You can identify some forward-looking statements
−Removed: by the use of words such as “believe,”
+Added: You can identify some forward-looking statements by
+Added: the use of words such as “believe,”
“anticipate,”
11 unchanged sentences
and sell products that incorporate our touch technology, the length of a product development and release cycle, our and our customers’
−Removed: reliance on component suppliers, the difficulty in verifying royalty amounts owed to us, our limited experience manufacturing
−Removed: hardware devices, our ability to remain competitive in response to new technologies, our dependence on key members of our management
−Removed: and development team, the costs to defend, as well as risks of losing, patents and intellectual property rights, our ability to
−Removed: obtain adequate capital to fund future operations, our ability to terminate our registration as a U.S.
−Removed: public company, and the
−Removed: future status of our common stock listing on the Nasdaq Stock Market and potential listing on the Nasdaq Stockholm.
−Removed: For a discussion
−Removed: of these and other factors that could cause actual results to differ from those contemplated in the forward-looking statements,
−Removed: please see the discussion under “Risk Factors”
−Removed: and elsewhere in this Quarterly Report on Form 10-Q, our Annual Report
−Removed: on Form 10-K for the fiscal year ended December 31, 2019 and in our publicly available filings with the Securities and Exchange
−Removed: Forward-looking statements reflect our analysis only as of the date of this Quarterly Report on Form 10-Q.
−Removed: actual events or results may differ materially from those discussed in or implied by forward-looking statements made by us or
−Removed: on our behalf, you should not place undue reliance on any forward-looking statement.
−Removed: We do not undertake responsibility to update
−Removed: or revise any of these factors or to announce publicly any revision to forward-looking statements, whether as a result of new
−Removed: information, future events or otherwise.
−Removed: following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and the notes
−Removed: thereto included in Item 1 of this Quarterly Report on Form 10-Q and consolidated financial statements for the year ended December
−Removed: 31, 2019 included in our Annual Report on Form 10-K.
−Removed: Inc., collectively with its subsidiaries, is referred to in this Form 10-Q as “Neonode”, “we”, “us”,
−Removed: “our”, “registrant”, or “Company”.
−Removed: company provides advanced optical sensing solutions for human-machine interface (“HMI”) and remote sensing solutions
−Removed: for driver and cabin monitoring features in automotive and other application areas.
−Removed: mainly operate in the business-to-business (“B2B”) markets.
−Removed: license our technology to Original Equipment Manufacturers (“OEMs”) and Tier 1 suppliers who embed our technology
−Removed: into products they develop, manufacture and sell.
−Removed: Since 2010, our HMI Solutions customers have sold approximately 76 million devices
−Removed: that use our technology and within this business area we derive revenues through technology licensing and engineering consulting
−Removed: of June 30, 2020, we had thirty-six valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers.
+Added: reliance on component suppliers, the difficulty in verifying royalty amounts owed to us, our limited experience manufacturing hardware
+Added: devices, our ability to remain competitive in response to new technologies, our dependence on key members of our management and
+Added: development team, the costs to defend, as well as risks of losing, patents and intellectual property rights, our ability to obtain
+Added: adequate capital to fund future operations, the outcome and expense of lawsuits against us and our directors and officers (including
+Added: the pending lawsuit in the Delaware Court of Chancery related to the Private Placement), our ability to terminate our registration
+Added: public company, and the future status of our common stock listing on the Nasdaq Stock Market and potential listing on
+Added: the Nasdaq Stockholm.
+Added: For a discussion of these and other factors that could cause actual results to differ from those contemplated
+Added: in the forward-looking statements, please see the discussion under “Risk Factors”
+Added: and elsewhere in this Quarterly Report
+Added: on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and in our publicly available filings
+Added: with the Securities and Exchange Commission.
+Added: Forward-looking statements reflect our analysis only as of the date of this Quarterly
+Added: Report on Form 10-Q.
+Added: Because actual events or results may differ materially from those discussed in or implied by forward-looking
+Added: statements made by us or on our behalf, you should not place undue reliance on any forward-looking statement.
+Added: We do not undertake
+Added: responsibility to update or revise any of these factors or to announce publicly any revision to forward-looking statements, whether
+Added: as a result of new information, future events or otherwise.
+Added: The following discussion
+Added: and analysis should be read in conjunction with the condensed consolidated financial statements and the notes thereto included
+Added: elsewhere in this Quarterly Report on Form 10-Q and consolidated financial statements for the year ended December 31, 2019 included
+Added: in our Annual Report on Form 10-K.
+Added: Neonode Inc., collectively
+Added: with its subsidiaries, is referred to in this Form 10-Q as “Neonode”, “we”, “us”, “our”,
+Added: “registrant”, or “Company”.
+Added: Neonode provides advanced
+Added: optical sensing solutions for human-machine interface (“HMI”) and remote sensing solutions for driver and cabin monitoring
+Added: features in automotive and other application areas.
+Added: We mainly operate in
+Added: the business-to-business (“B2B”) markets.
+Added: HMI Solutions
+Added: We license our technology
+Added: to Original Equipment Manufacturers (“OEMs”) and Tier 1 suppliers who embed our technology into products they develop,
+Added: manufacture and sell.
+Added: Since 2010, our HMI Solutions customers have sold approximately 77 million devices that use our technology
+Added: and within this business area we derive revenues through technology licensing and engineering consulting services.
+Added: As of September 30,
+Added: 2020, we had thirty-six valid technology license agreements with global OEMs, ODMs and Tier 1 suppliers.
Our licensing customer
8 unchanged sentences
using our technology.
−Removed: also offer engineering consulting services to our licensing customers on a flat rate or hourly rate basis.
−Removed: Typically, our customers
−Removed: require engineering support during the development and initial manufacturing phase for their products using our technology.
−Removed: addition to our technical solutions business, we design and manufacture sensor modules that incorporate our patented technology.
−Removed: We sell our embedded sensors components to OEMs, Original Design Manufacturers (“ODMs”) and Tier 1 suppliers for use
−Removed: in their products.
−Removed: Within this business area we derive revenues through selling embedded sensor modules and engineering consulting
−Removed: utilize a robotic manufacturing process designed specifically for our components.
−Removed: Industry specific sensor modules with a common
−Removed: technology platform provides hardware touch, gesture and object sensing solutions that, paired with our technology licensing platform,
−Removed: gives us a full range of options to enter and compete in key markets.
−Removed: also offer engineering consulting services to our sensor module customers on a flat rate or hourly rate basis.
−Removed: Typically, our
−Removed: customers require hardware or software modifications of our standard products or support during the development and initial manufacturing
−Removed: phase for their products using our technology.
−Removed: October 2017, we began selling embedded sensor modules to business customers in the industrial and consumer electronics markets.
−Removed: Over time, we expect a significant portion of our revenues will be derived from the HMI Products business area.
−Removed: offerings include a consumer product, AirBar.
−Removed: As a plug and play accessory, AirBar enables touch and gesture functionality for
−Removed: notebook computers.
+Added: We also offer engineering
+Added: consulting services to our licensing customers on a flat rate or hourly rate basis.
+Added: Typically, our customers require engineering
+Added: support during the development and initial manufacturing phase for their products using our technology.
+Added: In addition to our
+Added: technical solutions business, we design and manufacture sensor modules that incorporate our patented technology.
+Added: We sell our embedded
+Added: sensors components to OEMs, Original Design Manufacturers (“ODMs”) and Tier 1 suppliers for use in their products.
+Added: Within this business area we derive revenues through selling embedded sensor modules and engineering consulting services.
+Added: We utilize a robotic
+Added: manufacturing process designed specifically for our components.
+Added: Industry specific sensor modules with a common technology platform
+Added: provides hardware touch, gesture and object sensing solutions that, paired with our technology licensing platform, gives us a full
+Added: range of options to enter and compete in key markets.
+Added: We also offer engineering
+Added: consulting services to our sensor module customers on a flat rate or hourly rate basis.
+Added: Typically, our customers require hardware
+Added: or software modifications of our standard products or support during the development and initial manufacturing phase for their
+Added: products using our technology.
+Added: In October 2017, we
+Added: began selling embedded sensor modules to business customers in the industrial and consumer electronics markets.
+Added: Over time, we expect
+Added: a significant portion of our revenues will be derived from the HMI Products business area.
+Added: Our offerings include
+Added: a consumer product, AirBar.
+Added: As a plug and play accessory, AirBar enables touch and gesture functionality for notebook computers.
AirBar is powered by our sensor modules.
−Removed: In 2016 and 2017, we began shipping 15.6 inch, 13.3 inch and 14 inch
−Removed: AirBar to distributors and customers in the United States and Europe.
−Removed: We have no current plans to develop new Neonode branded
−Removed: products for the consumer markets.
−Removed: Sensing Solutions
−Removed: this newly formed business area, we intend to address the demand for cost-effective driver and cabin monitoring systems.
−Removed: developed a software platform for driver and cabin monitoring that is flexible, scalable and hardware-agnostic, and uses computationally
−Removed: efficient machine-learning algorithms.
−Removed: Within this business area we expect to derive revenues through technology licensing and
−Removed: engineering consulting services.
−Removed: December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China.
−Removed: Less than four
−Removed: months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic.
−Removed: Our near term growth and overall
−Removed: business is being adversely impacted and we expect will continue to be adversely impact by COVID-19 and the related global economic
−Removed: Although we anticipate potential additional demand in our contactless touch products, we expect COVID-19 will have negative
−Removed: effects on our customers’
+Added: In 2016 and 2017, we began shipping 15.6 inch, 13.3 inch and 14 inch AirBar to distributors
+Added: and customers in the United States and Europe.
+Added: We have no current plans to develop new Neonode branded products for the consumer
+Added: Remote Sensing Solutions
+Added: With this newly formed
+Added: business area, we intend to address the demand for cost-effective driver and cabin monitoring systems.
+Added: We have developed a software
+Added: platform for driver and cabin monitoring that is flexible, scalable and hardware-agnostic, and uses computationally efficient machine-learning
+Added: Within this business area we expect to derive revenues through technology licensing and engineering consulting services.
+Added: Impact of COVID-19
+Added: In December 2019, a
+Added: novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China.
+Added: Less than four months later, on
+Added: March 11, 2020, the World Health Organization declared COVID-19 a global pandemic.
+Added: Our near term growth and overall business is
+Added: being adversely impacted and we expect will continue to be adversely impact by COVID-19 and the related global economic slowdown.
+Added: Although we anticipate potential additional demand in our contactless touch products, we expect COVID-19 will have negative effects
+Added: on our customers’
businesses and their sales volumes.
−Removed: We are experiencing challenges in obtaining deliveries of
−Removed: components needed to manufacture our sensor modules and we may have difficulties delivering our products to our customers in time
−Removed: and at a reasonable cost.
−Removed: Our operations have been impacted as we paused business-related travel and our employees work remotely.
−Removed: The extent of COVID-19’s impact on our operational and financial performance will depend on future developments, including
−Removed: the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considered the rapidly
−Removed: evolving landscape.
+Added: We are experiencing challenges in obtaining deliveries of components
+Added: needed to manufacture our sensor modules and we may have difficulties delivering our products to our customers in time and at a
+Added: reasonable cost.
+Added: Our operations have been impacted as we paused business-related travel and our employees to a high extent work
+Added: The extent of COVID-19’s impact on our operational and financial performance will depend on future developments,
+Added: including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considered the
+Added: rapidly evolving landscape.
To mitigate the financial effects of the COVID-19 pandemic, we have undertaken cost-reduction measures.
−Removed: particular, we have implemented a Swedish government-backed program of short-term layoffs that has resulted in the reduction of
−Removed: staff working hours by 20%.
−Removed: We are monitoring the impact of the COVID-19 pandemic and we may take further actions in response.
−Removed: There is a risk that we will not be successful in mitigating COVID-19’s impact on our business, and our sales may not increase
−Removed: in line with our expectations and our operating margins could fluctuate or decline.
−Removed: of Operations
−Removed: summary of our financial results is as follows (in thousands, except percentages):
+Added: In particular, we implemented a Swedish government-backed program of short-term layoffs that resulted in the reduction of staff
+Added: working hours by 20% between mid-April to mid-August.
+Added: We are monitoring the impact of the COVID-19 pandemic and we may take further
+Added: actions in response.
+Added: There is a risk that we will not be successful in mitigating COVID-19’s impact on our business, and
+Added: our sales may not increase in line with our expectations and our operating margins could fluctuate or decline.
+Added: Results of Operations
+Added: A summary of our financial results is as
+Added: follows (in thousands, except percentages):
Three months ended
−Removed: Variance in Dollars
−Removed: Variance in Percent
+Added: September 30,
HMI Solutions
21 unchanged sentences
Percentage of revenue
−Removed: Provision for income taxes
+Added: Provision (benefit) for income taxes
Percentage of revenue
1 unchanged sentence
Percentage of revenue
−Removed: Net loss attributable to Neonode Inc.
+Added: Preferred dividends
Percentage of revenue
+Added: Net loss attributable to common shareholders of Neonode Inc.
+Added: Percentage of revenue
Net loss per share attributable to Neonode Inc.
Percentage of revenue
−Removed: Six months ended
−Removed: Variance in Dollars
−Removed: Variance in Percent
+Added: Nine months ended
+Added: September 30,
HMI Solutions
25 unchanged sentences
Percentage of revenue
−Removed: Net Loss attributable to Neonode Inc.
+Added: Preferred Dividends
Percentage of revenue
+Added: Net Loss attributable to common shareholders of Neonode Inc.
+Added: Percentage of revenue
Net Loss per share attributable to Neonode Inc.
Percentage of revenue
−Removed: of our sales for the three and six months ended June 30, 2020 and 2019 were to customers located in the U.S., Europe and Asia.
+Added: All of our sales for
+Added: the three and nine months ended September 30, 2020 and 2019 were to customers located in the U.S., Europe and Asia.
Since January 1, 2020,
we have allocated revenues to three different business areas.
−Removed: Revenues allocated to HMI Solutions consist of license fees and non-recurring
−Removed: engineering revenues allocated thereto while revenues allocated to HMI Products are derived from the sale of sensor modules and
−Removed: non-recurring engineering revenues allocated thereto.
−Removed: We expect future revenues within our Remote Sensing Solutions business area
−Removed: to be derived from license fees and non-recurring engineering revenues.
−Removed: decrease of 55.7% and 44.9% in total net revenues for the three- and six-month period in 2020 as compared to the same period in
−Removed: 2019 was primarily related to lower license revenues within our business area HMI Solutions.
−Removed: The decrease in revenues was also
−Removed: the result of lower estimates for unbilled license fees.
−Removed: In accordance with our revenue recognition policy, we record unbilled
−Removed: license fees using prior royalty revenue data.
−Removed: For the three months ended June 30, 2020, due to the uncertainty in the global
−Removed: economy, we recorded lower estimated license fees than in the same period in 2019.
−Removed: following tables present the net revenues distribution per business area and revenue stream for the three and six months ended
−Removed: June 30, 2020 and 2019 (dollars in thousands):
+Added: Revenues allocated to HMI Solutions consist of license fees and related
+Added: non-recurring engineering revenues while revenues allocated to HMI Products are derived from the sale of sensor modules and related
+Added: non-recurring engineering revenues.
+Added: We expect that future revenues within our Remote Sensing Solutions business area will be derived
+Added: from license fees and non-recurring engineering revenues.
+Added: The increase of 14.12%
+Added: in total net revenues for the three-month period in 2020 as compared to the same period in 2019 was primarily related to significantly
+Added: higher revenues from sensor module sales offset by slightly lower license revenues.
+Added: The decrease of 29.51% in total net revenues
+Added: for the nine-month period in 2020 as compared to the same period in 2019 was primarily related to lower license revenues within
+Added: our HMI Solutions business area.
+Added: The following tables
+Added: present the net revenues distribution per business area and revenue stream for the three and nine months ended September 30, 2020
+Added: and 2019 (dollars in thousands):
Three months ended
−Removed: June 30, 2020
+Added: September 30,
Three months ended
−Removed: June 30, 2019
+Added: September 30,
HMI Solutions
2 unchanged sentences
Non-recurring engineering
−Removed: Six months ended
−Removed: June 30, 2020
−Removed: Six months ended
−Removed: June 30, 2019
+Added: Nine months ended
+Added: September 30,
+Added: Nine months ended
+Added: September 30,
HMI Solutions
3 unchanged sentences
Our combined total
−Removed: gross margin was 84% and 92% for the three and six months ended June 30, 2020 and 96% and 95% for the three and six months ended
−Removed: June 30, 2019, respectively.
−Removed: The decrease in total gross margin in 2020 as compared to 2019 was primarily due to higher costs relating
−Removed: to write off of inventory in 2020.
−Removed: For the three and six months ended June 30, 2020, revenues from HMI Solutions business area accounted
−Removed: for 89% and 91% of total revenue compared to 86% and 92% in the same periods in 2019 and revenues from HMI Products business area
−Removed: accounted for 11% and 9% of total revenue compared to 14% and 8% in the same periods 2019.
−Removed: There were no revenues from our Remote
−Removed: Sensing Solutions business area for the three or six months ended June 30, 2019 and 2020.
−Removed: cost of revenues includes the direct cost of production of certain customer prototypes, costs of engineering personnel, engineering
−Removed: consultants to complete the engineering design contracts and cost of goods sold for sensor modules includes fully burdened manufacturing
−Removed: costs, outsourced final assembly costs, and component costs of sensor modules.
−Removed: and Development
−Removed: and development (“R&D”) expenses for the three and six months ended June 30, 2020 were $1.0 million and $2.0 million,
−Removed: respectively.
+Added: gross margin was 87% and 90% for the three and nine months ended September 30, 2020, respectively, and 95% for the three and nine
+Added: months ended September 30, 2019, respectively.
+Added: The decrease in total gross margin in 2020 as compared to 2019 was primarily due
+Added: to higher costs relating to write off of inventory in 2020.
+Added: For the three and nine months ended September 30, 2020, revenues from
+Added: HMI Solutions business area accounted for 81% and 87%, respectively, of total revenue compared to 93% and 92%, respectively, in
+Added: the same periods in 2019 and revenues from HMI Products business area accounted for 19% and 13%, respectively, of total revenue
+Added: compared to 7% and 8%, respectively, in the same periods 2019.
+Added: There were no revenues from our Remote Sensing Solutions business
+Added: area for the three or nine months ended September 30, 2019 and 2020.
+Added: Our cost of revenues
+Added: includes the direct cost of production of certain customer prototypes, costs of engineering personnel, engineering consultants
+Added: to complete the engineering design contracts and cost of goods sold for sensor modules includes fully burdened manufacturing costs,
+Added: outsourced final assembly costs, and component costs of sensor modules.
+Added: Research and Development
+Added: Research and development
+Added: (“R&D”) expenses for the three and nine months ended September 30, 2020 were $0.9 million and $2.9 million, respectively.
For the same periods in 2019, the R&D expenses were $1.2 million and $3.9 million.
−Removed: decrease was primarily related to lower staff expenses for the six months ended June 30, 2020 and a large number of scrapped inventory
−Removed: during the three months ended June 30, 2019.
−Removed: R&D expenses primarily consist of personnel-related costs in addition to external
−Removed: consultancy costs, such as testing, certifying and measurements, along with costs related to developing and building new product
−Removed: and Marketing
−Removed: and marketing expenses for the six months ended June 30, 2020 were $0.6 million and $1.2 million, respectively.
+Added: The decrease was primarily
+Added: related to lower staff expenses for the nine months ended September 30, 2020 and a large number of scrapped inventory during the
+Added: three months ended September 30, 2019.
+Added: R&D expenses primarily consist of personnel-related costs in addition to external consultancy
+Added: costs, such as testing, certifying and measurements, along with costs related to developing and building new product prototypes.
+Added: Sales and Marketing
+Added: Sales and marketing
+Added: expenses for the three and nine months ended September 30, 2020 were $0.6 million and $1.8 million, respectively.
The sales and
2 unchanged sentences
expenses due to a reallocation of employees to the marketing function.
−Removed: sales activities focus on OEM, ODM and Tier 1 customers who will license our technology or purchase and embed our touch sensor
−Removed: modules into their products.
+Added: Our sales activities
+Added: focus on OEM, ODM and Tier 1 customers who will license our technology or purchase and embed our touch sensor modules into their
Our customers will then sell and market their products incorporating our technology to their customers.
−Removed: We expect to expand our HMI Solutions and Product sales and marketing activities in 2020 and future years to capture market share
−Removed: in our target markets.
−Removed: and Administrative
−Removed: and administrative (“G&A”) expenses for the three and six months ended June 30, 2020 were $0.7 million and $1.5
−Removed: million, respectively.
−Removed: The G&A expenses for the three and six months ended June 30, 2019 were $1.0 million and $1.9 million,
−Removed: respectively.
−Removed: The decrease was primarily due to lower staff expenses and lower costs for patents which for the six months ended
−Removed: June 30, 2019 included the assignment of a portfolio of patents to Aequitas Technologies LLC.
−Removed: effective tax rate was 0% and (1)% for the three and six months ended June 30, 2020, respectively, and (1)% and (1)% for the
−Removed: three and six months ended June 30, 2019, respectively.
−Removed: The negative tax rate in the three and six months ended June 30, 2020
−Removed: and June 30, 2019 is due to withholding taxes from sales.
−Removed: We recorded valuation allowances for the three and six-month
−Removed: periods ended June 30, 2020 and June 30, 2019 for deferred tax assets related to net operating losses due to the uncertainty
−Removed: of realization.
−Removed: a result of the factors discussed above, we recorded a net loss attributable to Neonode Inc.
+Added: expand our HMI Solutions and Product sales and marketing activities in 2020 and future years to capture market share in our target
+Added: General and Administrative
+Added: General and administrative (“G&A”) expenses
+Added: for the three and nine months ended September 30, 2020 were $1.5 million and $3.0 million, respectively.
+Added: The G&A expenses for
+Added: the three and nine months ended September 30, 2019 were $0.8 million and $2.7 million, respectively.
+Added: The increase was primarily
+Added: due to costs relating to a lawsuit further described in Note 8 –
+Added: Commitments and Contingencies –
+Added: Litigation in the
+Added: Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form 10-Q.
+Added: Our effective tax rate
+Added: was 0% and 0% for the three and nine months ended September 30, 2020, respectively, and (0)% and (0)% for the three and nine months
+Added: ended September 30, 2019, respectively.
+Added: The negative tax rate in the three and nine months ended September 30, 2020 and September
+Added: 30, 2019 is due to withholding taxes from sales.
+Added: We recorded valuation allowances for the three and nine-month periods ended September
+Added: 30, 2020 and September 30, 2019 for deferred tax assets related to net operating losses due to the uncertainty of realization.
+Added: Preferred Dividends
+Added: Pursuant to the Securities
+Added: Purchase Agreement entered into on August 7, 2020, Neonode issued Series C-1 Preferred Stock and Series C-2 Preferred Stock (together,
+Added: the “Preferred Shares”).
+Added: The holders of the Preferred Shares were entitled to receive dividends at the rate per share
+Added: of 5% per annum until conversion into common stock.
+Added: As of September 30, 2020, $2,000 of preferred dividends had been paid and $31,000
+Added: As a result of the
+Added: factors discussed above, we recorded a net loss attributable to common shareholders of Neonode Inc.
of $1.6 million and $4.3 million
−Removed: for the three and six months ended June 30, 2020, respectively, and $1.3 million and $1.8 million for the same periods in 2019.
−Removed: Sheet Arrangements
−Removed: have a bank guarantee of $210,000 for AirBar packaging material held at a manufacturing partner.
−Removed: We do not have any other transactions,
−Removed: arrangements, or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital
−Removed: resources other than the operating leases incurred in the normal course of business
−Removed: have no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk
−Removed: We do not engage in leasing, hedging, research and development services, or other relationships that expose us to liability
−Removed: that is not reflected on the face of the consolidated financial statements.
−Removed: Obligations and Commercial Commitments
−Removed: Non-Recurring
−Removed: Engineering Development Costs
−Removed: April 25, 2013, we entered into an Analog Device Development Agreement with an effective date of December 6, 2012 (the “NN1002
−Removed: Agreement”) with Texas Instruments (“TI”) pursuant to which TI agreed to integrate our intellectual property
−Removed: into an ASIC.
−Removed: Under the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the
−Removed: rate of $0.25 per ASIC for each of the first 2 million ASICs sold.
−Removed: As of June 30, 2020, we had made no payments to TI under the
−Removed: NN1002 Agreement.
−Removed: On August 22, 2016,
−Removed: we entered into a lease of office space located at 2880 Zanker Road, San Jose, CA 95134.
−Removed: The lease will be renewed in August 2020
−Removed: but only as a postbox at a lower cost.
−Removed: July 1, 2014, Neonode Technologies AB entered into a lease for 7,007 square feet of office space located at Storgatan 23C, Stockholm,
−Removed: The lease agreement was renegotiated and renewed in December 2019 and is valid through November 2020.
−Removed: It is extended on
−Removed: a yearly basis unless written notice three months prior to expiration date.
−Removed: December 1, 2015, Pronode Technologies AB entered into a lease agreement for 9,040 square feet of workshop located at Faktorvägen
−Removed: 17, Kungsbacka, Sweden.
+Added: for the three and nine months ended September 30, 2020, respectively, and $1.1 million and $2.9 million for the same periods in
+Added: Off-Balance Sheet Arrangements
+Added: We have a bank guarantee
+Added: of $210,000 for AirBar packaging material held at a manufacturing partner.
+Added: We do not have any other transactions, arrangements,
+Added: or other relationships with unconsolidated entities that are reasonably likely to affect our liquidity or capital resources other
+Added: than the operating leases incurred in the normal course of business
+Added: We have no special
+Added: purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support.
+Added: not engage in leasing, hedging, research and development services, or other relationships that expose us to liability that is not
+Added: reflected on the face of the consolidated financial statements.
+Added: Contractual Obligations and Commercial
+Added: Non-Recurring Engineering Development
+Added: On April 25, 2013,
+Added: we entered into an Analog Device Development Agreement with an effective date of December 6, 2012 (the “NN1002 Agreement”)
+Added: with Texas Instruments (“TI”) pursuant to which TI agreed to integrate our intellectual property into an ASIC.
+Added: the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per ASIC
+Added: for each of the first 2 million ASICs sold.
+Added: As of September 30, 2020, we had made no payments to TI under the NN1002 Agreement.
+Added: Operating Leases
+Added: On July 1, 2014, Neonode
+Added: Technologies AB entered into a lease for 7,007 square feet of office space located at Storgatan 23C, Stockholm, Sweden.
+Added: agreement was renegotiated and renewed in December 2019 and is valid through November 2020.
+Added: The lease agreement has been terminated
+Added: and will not be extended.
+Added: On December 1, 2015,
+Added: Pronode Technologies AB entered into a lease agreement for 9,040 square feet of workshop located at Faktorvägen 17, Kungsbacka,
The lease is valid through December 9, 2020 and can be terminated with nine months’
−Removed: written notice
−Removed: before the termination date.
−Removed: January 2015, our subsidiary Neonode Korea Ltd.
+Added: written notice before the termination
+Added: In January 2015, our
+Added: subsidiary Neonode Korea Ltd.
entered into a lease agreement located at B-1807, Daesung D-Polis.
−Removed: 543-1, Seoul,
−Removed: The lease may be cancelled with 2 months’
−Removed: December 1, 2015, Neonode Taiwan Ltd.
+Added: 543-1, Seoul, South Korea.
+Added: lease may be cancelled with 2 months’
+Added: On December 1, 2015,
+Added: Neonode Taiwan Ltd.
entered into a lease agreement located at Rm.
−Removed: 2406, International Trade Building, Keelung
−Removed: Rd., Sec.1, Taipei, Taiwan.
+Added: 2406, International Trade Building, Keelung Rd., Sec.1, Taipei,
The lease is renewed monthly.
−Removed: September 1, 2019 we entered into a lease of office space located at NishiShinjuku Takagi Building, 1203 NishiShinjuku, Shinjukuku,
−Removed: Tokyo, Japan.
−Removed: The lease is valid through August 31, 2021 and is extended on a yearly basis unless written notice three months
+Added: On September 1, 2019,
+Added: we entered into a lease of office space located at NishiShinjuku Takagi Building, 1203 NishiShinjuku, Shinjukuku, Tokyo, Japan.
+Added: The lease is valid through August 31, 2021 and is extended on a yearly basis unless written notice three months prior to expiration
+Added: On September 1, 2020,
+Added: we entered into a lease of a mailbox at 2880 Zanker Road, San Jose, CA 95134.
+Added: The lease is valid through August 2021 and is extended
+Added: on a yearly basis unless written notice three months prior to expiration date.
+Added: Effective December
+Added: 1, 2020, we have agreed to enter into a new lease for 621 square meters of office space located at Karlavägen 100, Stockholm,
+Added: The lease agreement is valid through November 2022 and may be extended on a yearly basis unless written notice nine months
prior to expiration date.
−Removed: For the three and six months ended June
+Added: In connection to the new office, we have also entered into a lease for a storage facility, valid through
+Added: November 2022 and extended on a yearly basis unless written notice nine months prior to expiration date.
+Added: For the three and nine months ended September
30, 2020, we recorded approximately $154,000 and $435,000, respectively, for rent expense for all leased properties compared to
1 unchanged sentence
See Note 8 –
−Removed: Leases in the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1) for further discussions.
−Removed: April 2014, we entered into a lease for certain specialized milling equipment.
−Removed: Under the terms of the lease agreement we are obligated
−Removed: to purchase the equipment at the end of the original six-year lease term for 10% of the original purchase price of the equipment.
−Removed: In accordance with relevant accounting guidance the lease is classified as a finance lease.
−Removed: The lease payments and depreciation
−Removed: period began on July 1, 2014 when the equipment went into service.
+Added: Leases in the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form
+Added: 10-Q for further discussions of our operating leases.
+Added: Finance Leases
+Added: In April 2014, we entered
+Added: into a lease for certain specialized milling equipment.
+Added: Under the terms of the lease agreement we are obligated to purchase the
+Added: equipment at the end of the original six-year lease term for 10% of the original purchase price of the equipment.
+Added: In accordance
+Added: with relevant accounting guidance the lease is classified as a finance lease.
+Added: The lease payments and depreciation period began
+Added: on July 1, 2014 when the equipment went into service.
The implicit interest rate of the lease is 4% per annum.
−Removed: the second and the fourth quarters of 2016, we entered into six leases for component production equipment.
−Removed: Under the terms of
−Removed: five of the lease agreements entered into during 2016, we are obligated to purchase the equipment at the end of the original three
−Removed: to five years lease terms for 5-10% of the original purchase price of the equipment.
−Removed: In accordance with relevant accounting guidance
−Removed: these five leases are classified as finance leases.
−Removed: The lease payments and depreciation periods began between June and November
+Added: Between the second
+Added: and the fourth quarters of 2016, we entered into six leases for component production equipment.
+Added: Under the terms of five of the
+Added: lease agreements entered into during 2016, we are obligated to purchase the equipment at the end of the original three to five
+Added: years lease terms for 5-10% of the original purchase price of the equipment.
+Added: In accordance with relevant accounting guidance these
+Added: five leases are classified as finance leases.
+Added: The lease payments and depreciation periods began between September and November
2016 when the equipment went into service.
5 unchanged sentences
The implicit interest rate of this lease is approximately 3%
−Removed: 2017, we entered into one lease for component production equipment.
−Removed: Under the terms of the lease agreement the lease will be renewed
−Removed: within one year of the end of the original four-year lease term.
−Removed: In accordance with relevant accounting guidance, the lease is
−Removed: classified as a finance lease.
−Removed: The lease payments and depreciation periods began in May 2017 when the equipment went into service.
−Removed: The implicit interest rate of the lease is approximately 1.5% per annum.
−Removed: 2018, we entered into one lease for component production equipment.
−Removed: Under the terms of the agreement, the lease will be renewed
−Removed: within one year of the original four-year lease term.
+Added: In 2017, we entered
+Added: into one lease for component production equipment.
+Added: Under the terms of the lease agreement the lease will be renewed within one
+Added: year of the end of the original four-year lease term.
In accordance with relevant accounting guidance, the lease is classified
as a finance lease.
+Added: The lease payments and depreciation periods began in May 2017 when the equipment went into service.
+Added: interest rate of the lease is approximately 1.5% per annum.
+Added: In 2018, we entered
+Added: into one lease for component production equipment.
+Added: Under the terms of the agreement, the lease will be renewed within one year
+Added: of the original four-year lease term.
+Added: In accordance with relevant accounting guidance, the lease is classified as a finance lease.
The lease payments and depreciation periods began in August 2018 when the equipment went into service.
−Removed: implicit interest rate of the lease is approximately 1.5% per annum.
−Removed: Note 8 –
−Removed: Leases in the Notes to Unaudited Condensed Consolidated Financial Statements (Part I, Item 1) for further discussion.
−Removed: and Capital Resources
−Removed: liquidity is dependent on many factors, including sales volume, operating profit and the efficiency of asset use and turnover.
−Removed: Our future liquidity will be affected by, among other things:
−Removed: versus anticipated licensing of our technology;
−Removed: versus anticipated sales of sensor products, including AirBar;
−Removed: versus anticipated operating expenses;
−Removed: of our OEM customer product shipments;
−Removed: of payment for our technology licensing agreements;
−Removed: versus anticipated gross profit margin;
−Removed: to raise additional capital, if necessary.
−Removed: of June 30, 2020, we had cash of $1.8 million compared to $2.4 million as of December 31, 2019.
+Added: The implicit interest rate
+Added: of the lease is approximately 1.5% per annum.
+Added: See Note 8 –
+Added: Leases in the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report on Form
+Added: 10-Q for further discussion of our finance leases.
+Added: Liquidity and Capital Resources
+Added: Our liquidity is dependent
+Added: on many factors, including sales volume, operating profit and the efficiency of asset use and turnover.
+Added: Our future liquidity will
+Added: be affected by, among other things:
+Added: actual versus anticipated licensing of our technology;
+Added: actual versus anticipated sales of sensor products, including AirBar;
+Added: actual versus anticipated operating expenses;
+Added: timing of our OEM customer product shipments;
+Added: timing of payment for our technology licensing agreements;
+Added: actual versus anticipated gross profit margin;
+Added: ability to raise additional capital, if necessary.
+Added: As of September 30, 2020, we had cash of
+Added: $12.2 million compared to $2.4 million as of December 31, 2019.
Working capital (current
−Removed: assets less current liabilities) was $(0.1) million as of June 30, 2020, compared to $2.4 million as of December 31, 2019.
+Added: assets less current liabilities) was $12.0 million as of September 30, 2020, compared to $2.4 million as of December 31, 2019.
Net cash used in operating
−Removed: activities for the six months ended June 30, 2020 was $1.9 million and was primarily the result of a net loss of $2.9 million and
−Removed: approximately $0.4 million in non-cash operating expenses, comprised of depreciation and amortization and amortization of
+Added: activities for the nine months ended September 30, 2020 was $3.7 million and was primarily the result of a net loss of $4.6 million
+Added: and approximately $0.8 million in non-cash operating expenses, comprised of depreciation and amortization and amortization
+Added: of operating lease right-of-use assets.
+Added: Net cash used in operating
+Added: activities for the nine months ended September 30, 2019 was $2.9 million and was primarily the result of a net loss of $3.2 million
+Added: and offset by approximately $1.0 million in non-cash operating expenses, comprised primarily of depreciation and amortization of
operating lease right-of-use assets.
−Removed: Net cash used in operating activities for
−Removed: the six months ended June 30, 2019 was $1.5 million and was primarily the result of a net loss of $2.0 million and offset by approximately
−Removed: $0.6 million in non-cash operating expenses, comprised primarily of depreciation and amortization of operating lease right-of-use
Accounts receivable
−Removed: and unbilled revenues decreased by approximately $0.6 million as of June 30, 2020 compared to December 31, 2019.
−Removed: This was due to
−Removed: estimated lower revenues.
+Added: and unbilled revenues decreased by approximately $0.3 million as of September 30, 2020 compared to December 31, 2019.
+Added: due to estimated lower revenues.
Inventory increased
−Removed: by approximately $47,000 during the six months ended June 30, 2020 compared to December 31, 2019.
+Added: by approximately $98,000 during the nine months ended September 30, 2020 compared to December 31, 2019.
Deferred revenues increased
−Removed: by approximately $34,000 during the six months ended June 30, 2020 compared to December 31, 2019, primarily due to prepayments
−Removed: from customers for non-recurring engineering.
−Removed: During the six months
−Removed: ended June 30, 2020 we purchased approximately $7,000 of property and equipment, primarily furniture and test equipment.
−Removed: Net cash provided by
−Removed: financing activities of $1.3 million during the six months ended June 30, 2020 was the result of short-term borrowings of $966,000
−Removed: and short-term tax credits of $542,000, offset by principal payments on finance leases of $164,000.
+Added: by approximately $76,000 during the nine months ended September 30, 2020 compared to December 31, 2019, primarily due to increased
+Added: sale of sensor modules with return rights.
+Added: During the nine months
+Added: ended September 30, 2020 we purchased approximately $17,000 of property and equipment, primarily furniture and test equipment.
+Added: Net cash provided by financing activities of $13.7 million during
+Added: the nine months ended September 30, 2020 was the result of proceeds from short-term borrowings of $1.0 million and proceeds of
+Added: issuance of preferred and common stock net of offering costs of $13.5 million, offset by principal payments on short-term borrowings
+Added: and finance leases of $742,000.
Net cash used in financing
−Removed: activities of $272,000 during the six months ended June 30, 2019 was the result of principal payments on finance leases.
+Added: activities of $403,000 during the nine months ended September 30, 2019 was the result of principal payments on finance leases.
We have incurred significant
1 unchanged sentence
The Company incurred net losses of approximately
−Removed: $1.6 million and $2.6 million and $1.3 million and $1.8 million for the three and six months ended June 30, 2020 and 2019, respectively,
−Removed: and had an accumulated deficit of approximately $193.1 million and $190.5 million as of June 30, 2020 and December 31, 2019, respectively.
−Removed: In addition, operating activities used cash of approximately $1.9 million and $1.5 million for the six months ended June 30, 2020
−Removed: and 2019, respectively.
+Added: $1.6 million and $4.3 million and $1.1 million and $2.9 million for the three and nine months ended September 30, 2020 and 2019,
+Added: respectively, and had an accumulated deficit of approximately $194.8 million and $190.5 million as of September 30, 2020 and December
+Added: 31, 2019, respectively.
+Added: In addition, operating activities used cash of approximately $3.7 million and $2.9 million for the nine
+Added: months ended September 30, 2020 and 2019, respectively.
On June 17, 2020, the
−Removed: Company entered into short-term loan facilities (the “Loan Agreements”) with Ulf Rosberg and Peter Lindell, directors
−Removed: of Neonode (the “Directors”).
−Removed: Pursuant to the Loan Agreements, each Director made 16,145,000 SEK (Swedish Krona), which
−Removed: is approximately $1.7 million in U.S.
−Removed: dollars, principal amount available to the Company.
−Removed: As of June 30, 2020, the Company had
−Removed: made an initial drawdown of an aggregate of approximately $1.0 million.
+Added: Company entered into short-term loan facilities (the “Loan Agreements”) with two entities beneficially owned respectively
+Added: by each of Ulf Rosberg and Peter Lindell, directors of Neonode (each, a “Director”).
+Added: Pursuant to the Loan Agreements,
+Added: each Director made 16,145,000 SEK (Swedish Krona), which is approximately $1.7 million in U.S.
+Added: dollars, principal amount available
+Added: to the Company.
+Added: The Company made an initial drawdown of an aggregate of approximately $1.0 million under the Loan Agreements.
On August 5, 2020,
1 unchanged sentence
accredited investors as part of a private placement (the “Private Placement”).
+Added: On August 6, 2020,
+Added: in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series
+Added: C-1 5% Convertible Preferred Stock (the “Series C-1 Preferred Stock”) by filing a Series C-1 Certificate of Designation
+Added: of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized
+Added: and unissued preferred stock as Series C-2 5% Convertible Preferred Stock (the “Series C-2 Preferred Stock”) by filing
+Added: a Series C-2 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware.
+Added: The Series C-1 Preferred Stock and Series C-2 Preferred Stock are substantially the same, except the conversion of the Series C-2
+Added: Preferred Stock required additional shareholder approval in accordance with Nasdaq listing rules.
+Added: On August 7, 2020, Neonode issued 517 shares of Series C-2 Preferred
+Added: Stock to UMR Invest AB, the entity beneficially owned by Ulf Rosberg, to repay the indebtedness and accrued interest under the
+Added: Loan Agreement.
+Added: To effect a similar transaction with entities beneficially owned by the other Director, Peter Lindell, (i) on August
+Added: 7, 2020, at the closing of the Private Placement, Cidro Förvaltning AB paid for an additional 517 shares of Series C-2 Preferred
+Added: Stock, and (ii) on August 10, 2020, the next business day after the closing of the Private Placement, Neonode repaid to Cidro Holding
+Added: AB the debt and accrued interest due under the Loan Agreement, an amount that equaled the price of the 517 shares of Series C-2
+Added: Preferred Stock.
+Added: As a result of the repayments to each Director, the Loan Agreements terminated in accordance with their terms.
The closing of the
3 unchanged sentences
$6.50 per Common Share, and a total of 3,415 shares with a conversion price of $6.50 per share and a stated value of $1,000 of
−Removed: Series C-1 convertible preferred stock (the “Series C-1 Preferred Shares”) and Series C-2 convertible preferred stock
−Removed: (the “Series C-2 Preferred Shares”), for an aggregate purchase price of $13.9 million in gross proceeds.
−Removed: The Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares are substantially the same, except the conversion of the Series C-2 Preferred Shares requires
−Removed: additional shareholder approval in accordance with Nasdaq listing rules.
−Removed: Ulf Rosberg and Peter Lindell, directors of Neonode, and Urban Forssell the
−Removed: Chief Executive Officer of Neonode (together, the “Insiders”) purchased an aggregate of $3.05 million of the Series
−Removed: C-2 Preferred Shares pursuant to the Securities Purchase Agreement.
−Removed: Further, pursuant
−Removed: to the Securities Purchase Agreement, Neonode agreed to issue an additional 1,034 shares of Series C-2 Preferred Shares to
−Removed: Ulf Rosberg and Peter Lindell to repay an aggregate of $1.03 million of outstanding indebtedness owed to them under Loan
−Removed: Agreements described above.
−Removed: The net proceeds of $13.1 million attributable to the Private
−Removed: Placement will be used for working capital purposes.
−Removed: On August 6, 2020,
−Removed: in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series
−Removed: C-1 Preferred Shares by filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations (the “Series
−Removed: C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized
−Removed: and unissued preferred stock as Series C-2 Preferred Shares by filing a Series C-2 Certificate of Designation of Preferences, Rights
−Removed: and Limitations (the “Series C-2 Certificate of Designation”) with the Secretary of State of the State of Delaware.
−Removed: The Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares (together, the “Preferred Shares”) are convertible into 684,378 shares of Neonode
−Removed: common stock, subject to adjustment and limitations as provided in the Series C-1 Certificate of Designation and the Series C-2
−Removed: Certificate of Designation.
−Removed: The Series C-1 Preferred Shares and the Series C-2 Preferred Shares have no voting rights, however,
−Removed: under certain circumstances provided therein, the Company may not alter, change or amend the Series C-1 Certificate of Designation
−Removed: and Series C-2 Certificate of Designation without the affirmative vote of a majority of the then outstanding Series C-1 Preferred
−Removed: Shares and Series C-2 Preferred Shares, respectively.
−Removed: The holders of the Preferred Shares are entitled to receive dividends at
−Removed: the rate per share of 5% per annum, payable quarterly and on the conversion date.
−Removed: In the event of any liquidation, dissolution
−Removed: or winding-up of the Company, the holders of the Preferred Shares will participate pari passu with the holders of the Company’s
−Removed: common stock, on an as-converted basis.
+Added: Series C-1 Preferred Stock and Series C-2 Preferred Stock, for an aggregate purchase price of $13.9 million in gross proceeds.
+Added: Ulf Rosberg and Peter
+Added: Lindell, directors of Neonode, and Urban Forssell the Chief Executive Officer of Neonode purchased an aggregate of $3.1 million
+Added: of the Series C-2 Preferred Stock pursuant to the Securities Purchase Agreement.
+Added: The net proceeds of
+Added: the Private Placement are being used for working capital purposes.
+Added: Pursuant to their terms
+Added: and the provisions of the Securities Purchase Agreement, the Series C-1 Preferred Stock and Series C-2 Preferred Stock (together,
+Added: the “Preferred Shares”) were converted into 684,378 shares of Neonode common stock.
+Added: The holders of the Preferred Shares
+Added: were entitled to receive dividends at the rate per share of 5% per annum, totaling $33,000.
+Added: As of September 30, 2020, $2,000 of
+Added: preferred dividends had been paid and $31,000 was accrued.
In connection with
the Securities Purchase Agreement, Neonode entered into a Registration Rights Agreement (the “Registration Rights Agreement”)
−Removed: pursuant to which Neonode will file a registration statement with the SEC relating to the offer and sale by the holders of the
−Removed: Common Shares, and the shares of common stock underlying the Preferred Shares.
−Removed: Pursuant to the Registration Rights Agreement, Neonode
−Removed: is obligated to file the registration statement within 30 calendar days and to use reasonable best efforts to cause the registration
−Removed: statement to be declared effective within 75 calendar days or 105 calendar days in the case of a full review by the SEC.
−Removed: to meet those and related obligations, or failure to maintain the effective registration of the Common Shares and the shares of
−Removed: common stock underlying the Preferred Shares will subject Neonode to payment for liquidated damages.
−Removed: connection with the Private Placement, Neonode paid a fee to a placement agent of $659,070.
−Removed: condensed consolidated financial statements included herein have been prepared on a going concern basis, which contemplates continuity
−Removed: of operations and the realization of assets and the repayment of liabilities in the ordinary course of business.
−Removed: aim to grow our revenues in all business areas and continue to implement various measures to improve our operational efficiencies.
−Removed: No assurances can be given that management will be successful in meeting its revenue targets and reducing its operating loss.
−Removed: the future, we may require sources of capital in addition to cash on hand to continue operations and to implement our strategy.
−Removed: If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements.
−Removed: Historically,
−Removed: we have been able to access the capital markets through sales of common stock and warrants to generate liquidity.
−Removed: Our management
−Removed: believes it could raise capital through public or private offerings if needed to provide us with sufficient liquidity.
−Removed: assurances can be given that we will be successful in obtaining such additional financing on reasonable terms, or at all.
−Removed: funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have
−Removed: a negative effect on our business, results of operations and financial condition.
−Removed: In addition, no assurance can be given that
−Removed: stockholders will approve an increase in the number of our authorized shares of common stock.
−Removed: If funds and sufficient authorized
−Removed: shares are available, the issuance of equity securities or securities convertible into equity could dilute the value of shares
−Removed: of our common stock and cause the market price to fall, and the issuance of debt securities could impose restrictive covenants
−Removed: that could impair our ability to engage in certain business transactions.
−Removed: functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen, the South
−Removed: Korean Won and the Taiwan Dollar.
+Added: pursuant to which Neonode filed a registration statement with the Securities and Exchange Commission (the “SEC”) relating
+Added: to the offer and sale by the holders of the Common Shares, and the shares of common stock that were underlying the Preferred Shares.
+Added: Pursuant to the Registration Rights Agreement, Neonode was obligated to file the registration statement within 30 calendar days
+Added: and to use reasonable best efforts to cause the registration statement to be declared effective within 75 calendar days.
+Added: The registration
+Added: statement was declared effective by the SEC on September 18, 2020.
+Added: Failure to maintain the effective registration of the Common
+Added: Shares and the shares of common stock underlying the Preferred Shares will subject Neonode to payment for liquidated damages.
+Added: In connection with
+Added: the Private Placement, Neonode incurred total offering costs of $879,000.
+Added: The condensed consolidated
+Added: financial statements included herein have been prepared on a going concern basis, which contemplates continuity of operations and
+Added: the realization of assets and the repayment of liabilities in the ordinary course of business.
+Added: We aim to grow our
+Added: revenues in all business areas and continue to implement various measures to improve our operational efficiencies.
+Added: No assurances
+Added: can be given that management will be successful in meeting its revenue targets and reducing its operating loss.
+Added: In the future, we may
+Added: require sources of capital in addition to cash on hand to continue operations and to implement our strategy.
+Added: If our operations
+Added: do not become cash flow positive, we may be forced to seek equity investments or debt arrangements.
+Added: Historically, we have been
+Added: able to access the capital markets through sales of common stock and warrants to generate liquidity.
+Added: Our management believes it
+Added: could raise capital through public or private offerings if needed to provide us with sufficient liquidity.
+Added: No assurances can be
+Added: given that we will be successful in obtaining such additional financing on reasonable terms, or at all.
+Added: If adequate funds are not
+Added: available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect
+Added: on our business, results of operations and financial condition.
+Added: In addition, no assurance can be given that stockholders will approve
+Added: an increase in the number of our authorized shares of common stock.
+Added: If funds and sufficient authorized shares are available, the
+Added: issuance of equity securities or securities convertible into equity could dilute the value of shares of our common stock and cause
+Added: the market price to fall, and the issuance of debt securities could impose restrictive covenants that could impair our ability
+Added: to engage in certain business transactions.
+Added: The functional currency
+Added: of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen, the South Korean Won and the
+Added: Taiwan Dollar.
They are subject to foreign currency exchange rate risk.
−Removed: Any increase or decrease in the exchange
−Removed: rate of the U.S.
−Removed: Dollar compared to the Swedish Krona, Japanese Yen, South Korean Won or Taiwan Dollar will impact our future
−Removed: operating results.
−Removed: Accounting Policies
−Removed: contracts with customers may include promises to transfer multiple products and services to a customer, particularly when the
−Removed: contract covers a product and related engineering services fees for customizing that product for our customer.
−Removed: Determining whether
−Removed: products and services are considered distinct performance obligations that should be accounted for separately may require significant
−Removed: Judgment may also be required to determine the stand-alone selling price for each distinct performance obligation identified,
−Removed: although we generally structure our contracts such that performance obligations and pricing for each performance obligation are
−Removed: specifically addressed.
+Added: Any increase or decrease in the exchange rate of the U.S.
+Added: Dollar compared to the Swedish Krona, Japanese Yen, South Korean Won or Taiwan Dollar will impact our future operating results.
+Added: Critical Accounting Policies
+Added: Our contracts with
+Added: customers may include promises to transfer multiple products and services to a customer, particularly when the contract covers
+Added: a product and related engineering services fees for customizing that product for our customer.
+Added: Determining whether products and
+Added: services are considered distinct performance obligations that should be accounted for separately may require significant judgment.
+Added: Judgment may also be required to determine the stand-alone selling price for each distinct performance obligation identified, although
+Added: we generally structure our contracts such that performance obligations and pricing for each performance obligation are specifically
We currently have no outstanding contracts with multiple performance obligations;
−Removed: however, we recently
−Removed: negotiated a contract that may include multiple performance obligations in the future.
−Removed: products are sold with a right of return, and we may provide other credits or incentives to our customers, which could result
−Removed: in variability when determining the amount of revenue to recognize.
−Removed: At the end of each reporting period, we use product returns
−Removed: history and additional information that becomes available to estimate returns and credits.
−Removed: We do not recognize revenue if it is
−Removed: probable that a significant reversal of any incremental revenue would occur.
−Removed: Note 2 –
−Removed: Summary of Significant Accounting Policies in the Notes to Unaudited Condensed Consolidated Financial Statements
−Removed: (Part I, Item 1) for further discussion of critical accounting policies and discussion of estimates.
−Removed: have been no other changes from the critical accounting policies as previously disclosed in our Annual Report on Form 10-K for
−Removed: the fiscal year ended December 31, 2019.
−Removed: Quantitative and Qualitative Disclosures about Market Risk
+Added: however, we recently negotiated a
+Added: contract that may include multiple performance obligations in the future.
+Added: Our products are sold
+Added: with a right of return, and we may provide other credits or incentives to our customers, which could result in variability when
+Added: determining the amount of revenue to recognize.
+Added: At the end of each reporting period, we use product returns history and additional
+Added: information that becomes available to estimate returns and credits.
+Added: We do not recognize revenue if it is probable that a significant
+Added: reversal of any incremental revenue would occur.
+Added: See Note 2 –
+Added: Summary of Significant Accounting Policies in the Notes to Unaudited Condensed Consolidated Financial Statements included elsewhere
+Added: in this Quarterly Report on Form 10-Q for further discussion of critical accounting policies and discussion of estimates.
+Added: There have been no
+Added: other changes from the critical accounting policies as previously disclosed in our Annual Report on Form 10-K for the fiscal year
+Added: ended December 31, 2019.
+Added: Quantitative and Qualitative
+Added: Disclosures about Market Risk
+Added: Not applicable.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.