What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-11 compared with 2021-11-10 · 545 added, 790 removed, 358 unchanged (79% of the section changed)

2 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

Current assets:

Accounts receivable and unbilled revenue, net

Accounts receivable and unbilled revenues, net

Prepaid expenses and other current assets

1 unchanged sentence

Property and equipment, net

Operating lease right-of-use assets

Operating lease right-of-use assets, net

LIABILITIES AND STOCKHOLDERS’ EQUITY

3 unchanged sentences

Accrued expenses

Deferred revenues

Contract liabilities

Current portion of finance lease obligations

7 unchanged sentences

Common stock, 25,000,000 shares authorized, with par value of $ 0.001 ;

11,611,048 and 11,504,665 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively.

13,575,952 shares issued and outstanding at March 31, 2022 and December 31, 2021

Additional paid-in capital

11 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Non-recurring engineering

13 unchanged sentences

Total other expense

Loss before provision (benefit) for income taxes

Provision (benefit) for income taxes

Loss before provision for income taxes

Provision for income taxes

Net loss including noncontrolling interests

1 unchanged sentence

Net loss attributable to Neonode Inc.

Preferred dividends

Net loss attributable to common shareholders of Neonode Inc.

Loss per common share:

6 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Other comprehensive income (loss):

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In thousands, except for Preferred Stock Shares

For the Quarter to Date periods ended September

30, 2020 through September 30, 2021

Preferred Stock Shares

Preferred Stock Amount

(In thousands)

For the Quarter to Date periods ended March

31, 2021 through March 31, 2022

Common Stock Shares Issued

7 unchanged sentences

$ ( 196,158 )

Stock-based compensation

Foreign currency translation adjustment

1 unchanged sentence

$ ( 197,726 )

Stock-based compensation

Foreign currency translation adjustment

1 unchanged sentence

$ ( 199,383 )

Issuance of shares for cash, net

of offering costs

Series C-2 Preferred Stock issued

for repayment of short-term borrowings and accrued interest

Conversion of Series C-1 and C-2

Preferred Stock to common stock

Preferred dividends

Issuance of common stock under the ATM, net

Stock-based compensation

Foreign currency translation adjustment

1 unchanged sentence

$ ( 201,104 )

Issuance of shares for cash, net of offering costs

Stock-based compensation

6 unchanged sentences

$ ( 203,988 )

Stock-based compensation

Foreign currency translation adjustment

Balances, June 30,

$ ( 199,383 )

Issuance of common stock under the

Stock-based compensation

Foreign currency translation adjustment

Balances, September

$ ( 201,104 )

The accompanying notes are an integral part of

these condensed consolidated financial statements.

Shares Issued per series can be found under the equity footnote (see Note 3).

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine months ended

September 30,

Three months ended

Cash flows from operating activities:

6 unchanged sentences

Accounts receivable and unbilled revenue, net

Projects in process

Prepaid expenses and other current assets

7 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of preferred and common stock, net of offering costs

Proceeds from short term borrowings

Proceeds from short term tax credits

Payments on short term borrowings

Payments on short term tax credits

Principal payments on finance lease obligations

Payment of preferred dividend

Net cash provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash

Net increase (decrease) in cash

Net decrease in cash

Cash at beginning of period

3 unchanged sentences

Cash paid for interest

Supplemental disclosure of non-cash investing and financing activities:

Short-term borrowings and accrued interest settled for Series C-2 Preferred Stock

Accrual of dividends

Right-of-use asset obtained in exchange for lease obligation

The accompanying notes are an integral part of

5 unchanged sentences

opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim

periods presented.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of

results for a full fiscal year or any other period.

The accompanying condensed

consolidated financial statements for the three and nine months ended September 30, 2021 and 2020 have been prepared by us, pursuant to

the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

Certain information

and footnote disclosures normally contained in financial statements prepared in accordance with accounting principles generally accepted

period presented.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of results for a

full fiscal year or any other period.

The accompanying condensed consolidated financial statements for the

three months ended March 31, 2022 and 2021 have been prepared by us, pursuant to the rules and regulations of the United States Securities

and Exchange Commission (“SEC”).

Certain information and footnote disclosures normally contained in financial statements prepared

in accordance with accounting principles generally accepted in the United States (“U.S.

GAAP”) have been condensed or omitted.

These condensed consolidated financial statements should be read

in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the

fiscal year ended December 31, 2020.

These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and

notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Neonode Inc., which is collectively

3 unchanged sentences

We market and sell our contactless touch, touch,

and gesture sensing products and solutions using our zForce technology platform, and our scene analysis solutions using our MultiSensing

and gesture sensing products and solutions based on our zForce technology platform, and our scene analysis solutions based on our MultiSensing

technology platform.

We offer our solutions to customers in many different markets and segments including, but not limited to, consumer

electronics, office equipment, automotive, industrial automation, medical, military and avionics.

We offer our solutions to customers in many different markets and segments including, but not limited to, office

equipment, automotive, industrial automation, medical, military and avionics.

In our operations, we have

11 unchanged sentences

The Company incurred net losses of approximately $ 1.4 million

and $ 4.9 million and $ 1.6 million and $ 4.3 million for the three and nine months ended September 30, 2021 and 2020, respectively, and

had an accumulated deficit of approximately $ 201.1 million and $ 196.2 million as of September 30, 2021 and December 31, 2020, respectively.

In addition, operating activities used cash of approximately $ 5.0 million and $ 3.7 million for the nine months ended September 30, 2021

and 2020, respectively.

During the three and nine

months ended September 30, 2021, we sold an aggregate of 93,553 shares of common stock under our at-the-market (the “ATM Facility”)

Riley Securities, Inc.

Riley Securities”), resulting in net proceeds of approximately $ 593,000 to us after payment

of commissions to B.

Riley Securities of $ 18,000 .

During October 2021

we sold an aggregate of 142,169 shares under the ATM Facility with aggregate net proceeds to us of $ 1,396,000 after payment of commissions

Riley Securities of $ 43,000 .

On October 21, 2021, we entered

into a placement agency agreement with Pareto Securities Inc.

and Pareto Securities AB pursuant to which we sold to certain Swedish and

other European investors an aggregate of 1,808,000 shares of our common stock at a price of $ 7.75 per share in a registered direct offering

that closed on October 26, 2021 (the “Offering”).

We received net proceeds of approximately $ 13.1 million from the Offering

after deducting placement agent fees and offering expenses.

The condensed consolidated financial statements included in this report

have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment

of liabilities in the ordinary course of business.

and $ 1.6 million for the three months ended March 31, 2022 and 2021, respectively, and had an accumulated deficit of approximately $ 204.0

million and $ 202.6 million as of March 31, 2022 and December 31, 2021, respectively.

In addition, operating activities used cash of approximately

$ 2.3 million and $ 2.0 million for the three months ended March 31, 2022 and 2021, respectively.

The condensed consolidated

financial statements included in this report have been prepared on a going concern basis, which contemplates continuity of operations

and the realization of assets and the repayment of liabilities in the ordinary course of business.

Management evaluated the significance

12 unchanged sentences

securities convertible into equity could dilute the value of shares of our common stock and cause the market price to fall, and the issuance

of debt securities could impose restrictive covenants that could impair our ability to engage in certain business transactions.

of debt securities could impose restrictive covenants on us that could impair our ability to engage in certain business transactions.

We expect revenues will enable

13 unchanged sentences

Pronode Technologies AB was organized to manufacture and sell our touch

sensor modules (“TSM”).

sensor modules (“TSMs”).

All inter-company accounts and transactions have been eliminated in consolidation.

4 unchanged sentences

The condensed consolidated

balance sheets at September 30, 2021 and December 31, 2020 and the condensed consolidated statements of operations, comprehensive loss,

stockholders’ equity and cash flows for the three and nine months ended September 30, 2021 and 2020 include our accounts and those

of our wholly-owned subsidiaries as well as Pronode Technologies AB.

balance sheets at March 31, 2022 and December 31, 2021 and the condensed consolidated statements of operations, comprehensive loss, stockholders’

equity and cash flows for the three months ended March 31, 2022 and 2021 include our accounts and those of our wholly-owned subsidiaries

as well as Pronode Technologies AB.

Estimates and Judgments

18 unchanged sentences

fair value of options issued as stock-based compensation.

Cash and Cash Equivalents

We have not had any liquid

investments other than normal cash deposits with bank institutions to date.

The Company considers all highly liquid investments with original

maturities of three months or less to be cash equivalents.

Concentration of Cash Balance Risks

Cash balances are maintained

at various banks in the U.S., Japan, Taiwan and Sweden.

For deposits held with financial institutions in the U.S., the U.S.

Federal Deposit

Insurance Corporation provides basic deposit coverage with limits up to $250,000 per owner.

The Swedish government provides insurance

coverage up to 1,050,000 Krona per customer and covers deposits in all types of accounts.

For bank accounts of the category held by Neonode,

the Japanese government provides full insurance coverage.

The Central Deposit Insurance Corporation in Taiwan provides insurance coverage

up to 3,000,000 Taiwan Dollar per customer.

and Cash Equivalents

have not had any liquid investments other than normal cash deposits with bank institutions to date.

The Company considers all highly

liquid investments with original maturities of three months or less to be cash equivalents.

Concentration

of Cash Balance Risks

Cash balances are maintained at various banks in the United States,

Japan, Taiwan and Sweden.

For deposits held with financial institutions in the United States, the U.S.

Federal Deposit Insurance Corporation

provides basic deposit coverage with limits up to $250,000 per owner.

The Swedish government provides insurance coverage up to 1,050,000

Krona per customer and covers deposits in all types of accounts.

For bank accounts of the category held by Neonode, the Japanese government

provides full insurance coverage.

The Central Deposit Insurance Corporation in Taiwan provides insurance coverage up to 3,000,000 Taiwan

Dollar per customer.

At times, deposits held with financial institutions may exceed the amount of insurance provided.

Receivable and Allowance for Doubtful Accounts

Accounts receivable is stated

at net realizable value.

Our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make

required payments.

Credit limits are established through a process of reviewing the financial history and stability of each customer.

receivable is stated at net realizable value.

Our policy is to maintain allowances for estimated losses resulting from the inability

of our customers to make required payments.

Credit limits are established through a process of reviewing the financial history and stability

of each customer.

Should all efforts fail to recover the related receivable, we will write off the account.

We also record an allowance for all customers

based on certain other factors including the length of time the receivables are past due and historical collection experience with customers.

Our allowance for doubtful accounts was approximately $ 79,000 as of September 30, 2021 and December 31, 2020.

Projects in Process

Projects in process consist

of costs incurred toward the completion of various projects for certain customers.

These costs are primarily comprised of direct engineering

labor costs and project-specific equipment costs.

These costs are capitalized on our balance sheet as an asset and deferred until revenue

for each project is recognized in accordance with our revenue recognition policy.

There were no costs capitalized to projects in process

as of September 30, 2021 and December 31, 2020.

The Company’s inventory

consists primarily of components that will be used in the manufacturing of our TSMs.

We classify inventory for reporting purposes as raw

materials, work-in-process, and finished goods.

Inventory is stated at the

lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method.

Net realizable value is the

estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

We also record an allowance

for all customers based on certain other factors including the length of time the receivables are past due and historical collection

experience with customers.

Our allowance for doubtful accounts was approximately $ 79,000 as of March 31, 2022 and December 31, 2021.

in process consist of costs incurred toward the completion of various projects for certain customers.

These costs are primarily comprised

of direct engineering labor costs and project-specific equipment costs.

These costs are capitalized on our consolidated balance sheet

as an asset and deferred until revenue for each project is recognized in accordance with our revenue recognition policy.

There were no

costs capitalized to projects in process as of March 31, 2022 and December 31, 2021.

Company’s inventory consists primarily of components that will be used in the manufacturing of our TSMs.

We classify inventory

for reporting purposes as raw materials, work-in-process, and finished goods.

is stated at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method.

Net realizable

value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and

transportation.

Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current

Due to the low sell-through

1 unchanged sentence

Management has further decided to reserve for a portion of AirBar finished goods, depending on type of AirBar and in which location it

The AirBar inventory reserve was $ 0.8 million and $ 0.9 million as of September 30, 2021 and December 31, 2020, respectively.

To protect our manufacturing

partner from losses in relation to AirBar production, we agreed to secure the value of the inventory with a bank guarantee covering the

production of 20,000 AirBars.

Excess inventory was purchased from our manufacturing partner in 2019 and has been fully reserved.

Raw materials, work-in-process,

and finished goods are as follows (in thousands):

September 30,

The AirBar inventory reserve was $ 0.4 million and $ 0.8 million as of March 31, 2022 and December 31, 2021, respectively.

materials, work-in-process, and finished goods are as follows (in thousands):

Raw materials

Work-in-process

Finished goods

Ending inventory

Property and Equipment

Property and equipment are

stated at cost, net of accumulated depreciation and amortization.

Depreciation and amortization are computed using the straight-line method

based upon estimated useful lives of the assets as follows:

Estimated useful lives

and Equipment

and equipment are stated at cost, net of accumulated depreciation and amortization.

Depreciation and amortization are computed using

the straight-line method based upon estimated useful lives of the assets as follows:

Computer equipment

Furniture and fixtures

Equipment purchased under

a finance lease is recognized over the term of the lease if that lease term is shorter than the estimated useful life.

Upon retirement or sale of

property and equipment, cost and accumulated depreciation and amortization are removed from the accounts and any gains or losses are reflected

in the condensed consolidated statement of operations.

Maintenance and repairs are charged to expense as incurred.

Right of Use Assets

A right-of-use asset represents

a lessee’s right to use a leased asset for the term of the lease.

Our right-of-use assets generally consist of operating leases

for buildings and finance leases for manufacturing equipment.

Right-of-use assets are measured

initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs,

such as commissions paid to obtain a lease.

Right-of-use assets are subsequently

measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct

costs not yet expensed.

Long-lived Asset Recoverability

We assess the recoverability

of long-lived assets by estimating the future cash flows from the associated assets in accordance with relevant accounting guidance.

the estimated undiscounted future cash flows related to these assets decreases or the useful life is shorter than originally estimated,

we may incur charges for impairment of these assets.

As of September 30, 2021, we believe there was no impairment of our long-lived

There can be no assurance, however, that market conditions will not change or sufficient demand for our products and services

will continue, which could result in impairment of long-lived assets in the future.

Foreign Currency Translation and Transaction

Gains and Losses

purchased under a finance lease is recognized over the term of the lease if that lease term is shorter than the estimated useful life.

retirement or sale of property and equipment, cost and accumulated depreciation and amortization are removed from the accounts and any

gains or losses are reflected in the condensed consolidated statement of operations.

Maintenance and repairs are charged to expense as

Right-of-Use Asstes

right-of-use asset represents a lessee’s right to use a leased asset for the term of the lease.

Our right-of-use assets generally

consist of operating leases for buildings and finance leases for manufacturing equipment.

assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial

direct costs, such as commissions paid to obtain a lease.

assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent,

and any initial direct costs not yet expensed.

Long-lived Assets

assess the recoverability of long-lived assets by estimating the future cash flows from the associated assets in accordance with relevant

accounting guidance.

If the estimated undiscounted future cash flows related to these assets decreases or the useful life is shorter

than originally estimated, we may incur charges for impairment of these assets.

As of March 31, 2022, we believe there was no impairment

of our long-lived assets.

There can be no assurance, however, that market conditions will not change or sufficient demand for our products

and services will continue, which could result in impairment of long-lived assets in the future.

Currency Translation and Transaction Gains and Losses

The functional currency of

6 unchanged sentences

income (loss).

Foreign currency translation gains (losses) were $( 37,000 ) and $( 147,000 ) and $( 228,000 ) and $( 251,000 ) during the three

and nine months ended September 30, 2021 and 2020, respectively.

Gains (losses) resulting from foreign currency transactions are included

in general and administrative expenses in the accompanying condensed consolidated statements of operations and were $ 40,000 and $ 68,000

during the three and nine months ended September 30, 2021, respectively, compared to $( 135,000 ) and $( 149,000 ) during the same periods

in 2020, respectively.

Concentration of Credit and Business Risks

Foreign currency translation gains (losses) were $ 33,000 and $( 166,000 ) during the three months ended March 31, 2022 and

2021, respectively.

Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in

the accompanying condensed consolidated statements of operations and were $( 1,000 ) during the three months ended March 31, 2022 compared

to $ 82,000 during the same period in 2021.

Concentration

of Credit and Business Risks

Our customers are located

in the U.S., Europe and Asia.

As of September 30, 2021,

five customers represented approximately 82 % of our consolidated accounts receivable and unbilled revenues.

As of December 31, 2020, three

customers represented approximately 62 % of our consolidated accounts receivable and unbilled revenues.

Customers who accounted for

10 % or more of our net revenues during the three months ended September 30, 2021 are as follows:

● Hewlett Packard Company:

● Seiko Epson Corporation:

● LG Electronics Inc.:

Customers who accounted for

10 % or more of our net revenues during the nine months ended September 30, 2021 are as follows:

● Hewlett Packard Company:

● Seiko Epson Corporation:

● LG Electronics Inc.:

Customers who accounted for

10 % or more of our net revenues during the three months ended September 30, 2020 are as follows:

in the United States, Europe and Asia.

As of March 31, 2022, five

of our customers represented approximately 85 % of our consolidated accounts receivable and unbilled revenues.

of December 31, 2021, four of our customers represented approximately 76 % of our consolidated accounts receivable and unbilled revenues.

who accounted for 10 % or more of our net revenues during the three months ended March 31, 2022 are as follows:

● Hewlett-Packard Company – 32 %

● LG Electronics – 16 %

● Seiko Epson Corporation – 13 %

● Alpine Electronics, Inc – 12 %

● Seiko Epson – 17 %

● Alps Alpine – 11 %

Customers who accounted for

10 % or more of our net revenues during the nine months ended September 30, 2020 are as follows:

10 % or more of our net revenues during the three months ended March 31, 2021 are as follows:

● Hewlett-Packard Company – 19 %

● Seiko Epson Corporation – 19 %

● Alpine Electronics, Inc – 15 %

Revenue Recognition

We recognize revenue when

control of products is transferred to our customers, and when services are completed and accepted by our customers.

The amount of revenue

we recognize reflects the consideration we expect to receive for those products or services.

Our contracts with customers may include

combinations of products and services, for example, a contract that includes products and related engineering services.

We structure our

contracts such that distinct performance obligations, such as product sales or license fees, and related engineering services, are clearly

defined in each contract.

License fees for products

and sales of AirBar and TSMs are recognized on a per-unit basis;

therefore, we generally satisfy performance obligations as units are

shipped to our customers.

Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by

our customers.

We recognize revenue net of

allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise to transfer goods, therefore

we treat all shipping and handling charges as expenses.

Revenues from our business

areas derive from three different revenue streams:

license fees, product sales and non-recurring engineering fees.

Licensing Revenues:

We earn revenue from licensing

our internally developed intellectual property (“IP”).

Our licensing customer base is primarily in the automotive and printer

We enter into IP licensing agreements that generally provide licensees the right to incorporate our IP components into their

products, with terms and conditions that vary by licensee.

Fees under these agreements may include license fees relating to our IP, and royalties

payable to us following the distribution by our licensees of products incorporating the licensed technology.

The license for our IP has

standalone value and can be used by the licensee without maintenance and support.

For technology license arrangements

that do not require significant modification or customization of the underlying technology, we recognize technology license revenue when

the license is made available to the customer and the customer has a right to use that license.

At the end of each reporting period, we

record unbilled license fees, using prior royalty revenue data by customer to make estimates of those royalties.

Explicit return rights are

not offered to customers.

There have been no returns through September 30, 2021.

● Seiko Epson – 15 %

● Lexmark – 14 %

● Alps Alpine – 13 %

recognize revenue when control of products is transferred to our customers, and when services are completed and accepted by our customers;

the amount of revenue we recognize reflects the consideration we expect to receive for those products or services.

Our contracts with

customers may include combinations of products and services (e.g., a contract that includes products and related engineering services).

We structure our contracts such that distinct performance obligations, such as product sales or license fees, and related engineering

services, are clearly defined in each contract.

fees and sales of our AirBar and TSMs are on a per-unit basis.

Therefore, we generally satisfy performance obligations as units are shipped

to our customers.

Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by our customers.

recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental

We treat all product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise

to transfer goods, therefore we treat all shipping and handling charges as expenses.

earn revenue from licensing our internally developed intellectual property (“IP”).

We enter into IP licensing agreements

that generally provide licensees the right to incorporate our IP components in their products, with terms and conditions that vary by

Fees under these agreements may include license fees relating to our IP, and royalties payable to us following the distribution

by our licensees of products incorporating the licensed technology.

The license for our IP has standalone value and can be used by the

licensee without maintenance and support.

technology license arrangements that do not require significant modification or customization of the underlying technology, we recognize

technology license revenue when the license is made available to the customer and the customer has a right to use that license.

end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make estimates of those

return rights are not offered to customers.

There have been no returns through March 31, 2022.

We earn revenue from sales

of TSMs to our Original Equipment Manufacturers (“OEMs”) and Tier 1 supplier customers, who embed our hardware into their

products and, occasionally, from sales of our AirBar branded consumer products (incorporating our TSM technology) sold through distributors.

These distributors are generally given business terms that do not allow them to return unsold inventory.

Our sales agreements generally

provide customers with limited rights of return and warranty provisions.

The timing of revenue recognition

related to sales of TSMs and AirBars depends upon how each sale is transacted - either point-of-sale or through distributors.

revenue for products sold point-of-sale (online sales and other direct sales to customers) when we provide the promised product to the

of TSM hardware products to our original equipment manufacturers (“OEMs”), original design manufacturers (“ODMs”)

and Tier 1 supplier customers, who embed our hardware into their products, and from sales of branded consumer products that incorporate

our TSMs that are sold through distributors or directly to end users.

These distributors are generally given business terms that allow

them to return unsold inventory, receive credits for changes in selling prices, and participate in various cooperative marketing programs.

Our sales agreements generally provide customers with limited rights of return and warranty provisions.

timing of revenue recognition related to AirBar modules depends upon how each sale is transacted - either point-of-sale or through distributors.

We recognize revenue for AirBar modules sold point-of-sale (online sales and other direct sales to customers) when we provide the promised

product to the customer.

Because we generally use distributors

to provide TSMs and AirBars to our customers, we analyze the terms of distributor agreements to determine when control passes from us

to our distributors.

For sales of TSMs and AirBars sold through distributors, revenues are recognized when our distributors obtain control

over our products.

Control passes to our distributors when we have a present right to payment for products sold to distributors, the distributors

have legal title to and physical possession of products purchased from us, and the distributors have significant risks and rewards of

ownership of products purchased.

Distributors participate in

various cooperative marketing and other incentive programs, and we maintain estimated accruals and allowances for these programs.

credits received by distributors under these programs were to deviate significantly from our estimates, which are based on historical

experience, our revenue could be adversely affected.

to provide TSMs and AirBars to our customers, we must analyze the terms of our distributor agreements to determine when control passes

from us to our distributors.

For sales of TSMs and AirBars sold through distributors, we recognize revenues when our distributors obtain

control over our products.

Control passes to our distributors when we have a present right to payment for products sold to the distributors,

the distributors have legal title to and physical possession of products purchased from us, and the distributors have significant risks

and rewards of ownership of products purchased.

participate in various cooperative marketing and other incentive programs, and we maintain estimated accruals and allowances for these

If actual credits received by distributors under these programs were to deviate significantly from our estimates, which are

based on historical experience, our revenue could be adversely affected.

GAAP, companies

may make reasonable aggregations and approximations of returns data to accurately estimate returns.

Our returns and warranty experience

to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve homogenous

transactions.

The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was $ 76,000 as

of September 30, 2021 and $ 78,000 as of December 31, 2020.

If the actual future returns were to deviate from the historical data on which

the reserve had been established, our revenue could be adversely affected.

Engineering Services Revenues:

Our TSM and AirBar returns and warranty

experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve

homogenous transactions.

The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was

$ 64,000 as of March 31, 2022 and $ 69,000 as of December 31, 2021.

If the actual future returns were to deviate from the historical data

on which the reserve had been established, our revenue could be adversely affected.

Non-Recurring

For technology license or

TSM contracts that require modification or customization of the underlying technology to adapt that technology to the customer’s

desired use, we determine whether the technology licensing or TSM sales, and the engineering consulting services represent separate performance

We perform our analysis on a contract-by-contract basis.

If there are separate performance obligations, we determine the

standalone selling price (“SSP”) of each separate performance obligation to properly recognize revenue as each performance

obligation is satisfied.

TSM contracts that require modification or customization of the underlying technology to adapt the technology to customer use, we determine

whether the technology license or TSM, and required engineering consulting services represent separate performance obligations.

our analysis on a contract-by-contract basis.

If there are separate performance obligations, we determine the standalone selling price

(“SSP”) of each separate performance obligation to properly recognize revenue as each performance obligation is satisfied.

We provide engineering consulting services to our customers under a signed Statement of Work (“SOW”).

Deliverables and payment terms are specified in each SOW.

We generally charge an hourly rate or a flat rate for engineering services,

and we recognize revenue as the engineering services specified in the contracts are completed and accepted by our customers.

payments we receive for future non-recurring engineering services are recorded as unearned revenue until that revenue is earned.

We believe that recognizing

non-recurring engineering service revenues as progress towards completion of engineering services and when customer acceptance of those

services occurs best reflects the economics of those transactions, because engineering services as tracked in our systems correspond directly

with the value to our customers of our performance completed to date.

Hours performed for each engineering project are tracked and reflect

progress made on each project and are charged at a consistent hourly rate.

Revenues from engineering

services contracts that are short-term in nature are recorded when those services are complete and accepted by customers.

Revenues from engineering

services contracts with substantive defined deliverables for which payment terms in the SOW are commensurate with the efforts required

to produce such deliverables are recognized as they are completed and accepted by customers.

Deliverables and payment

terms are specified in each SOW.

We generally charge an hourly rate for engineering services, and we recognize revenue as engineering

services specified in contracts are completed and accepted by our customers.

Any upfront payments we receive for future non-recurring

engineering services are recorded as contract liabilities until that revenue is earned.

believe that recognizing non-recurring engineering services revenues as progress towards completion of engineering services and customer

acceptance of those services occurs best reflects the economics of those transactions, because engineering services as tracked in our

systems correspond directly with the value to our customers of our performance completed to date.

Hours performed for each engineering

project are tracked and reflect progress made on each project and are charged at a consistent hourly rate.

from non-recurring engineering contracts that are short-term in nature are recorded when those services are complete and accepted by

from non-recurring engineering contracts with substantive defined deliverables for which payment terms in the SOW are commensurate with

the efforts required to produce such deliverables are recognized as they are completed and accepted by customers.

Estimated losses on all SOW

projects are recognized in full as soon as they become evident.

During the three and nine months ended September 30, 2021 and 2020, no

losses related to SOW projects were recorded.

The following tables present

disaggregated revenues by market for the three and nine months ended September 30, 2021 and 2020 (dollars in thousands):

Three months ended

September 30, 2021

Three months ended

September 30, 2020

Net revenues from consumer electronics

Net revenues from distributors and other

Net revenues from automotive

Net revenues from consumer electronics

Net revenues from distributors and other

Net revenues from automotive

Net revenues from medical

Net revenues from distributors and other

Nine months ended

September 30, 2021

Nine months ended

September 30, 2020

Net revenues from consumer electronics

Net revenues from distributors and other

During the three months ended March 31, 2022 and 2021, no losses related

to SOW projects were recorded.

following tables present the net revenues distribution by geographical area and market for the three months ended March 31, 2022 and

2021 (dollars in thousands):

March 31, 2022

March 31, 2021

Net revenues from

consumer electronics

revenues from distributors and other

Net revenues from automotive

Net revenues from consumer electronics

Net revenues from distributors and other

Net revenues from consumer

revenues from distributors and other

Net revenues from automotive

Net revenues from medical

Net revenues from distributors and other

Significant Judgments

Our contracts with customers

may include promises to transfer multiple products and services to a customer, particularly when the contract is for a product and related

engineering services fees for customizing that product for our customer.

Determining whether products and services are considered distinct

performance obligations that should be accounted for separately may require significant judgment.

Judgment may also be required to determine

the SSP for each distinct performance obligation identified, although we generally structure our contracts such that performance obligations

and pricing for each performance obligation are specifically addressed.

We currently have no outstanding contracts with multiple performance

Judgment is also required

to determine when control of products passes from us to our distributors, as well as the amounts of product that may be returned to us.

Our products are sold with a right of return, and we may provide other credits or incentives to our customers, which could result in variability

when determining the amount of revenue to recognize.

At the end of each reporting period, we use product returns history and additional

information that becomes available to estimate returns and credits.

We do not recognize revenue if it is probable that a significant reversal

of any incremental revenue would occur.

Finally, judgment is required

to determine the amount of unbilled license fees at the end of each reporting period.

Contract Balances

Timing of revenue recognition

may differ from the timing of invoicing to customers.

We record a receivable when we have an unconditional right to receive future payments

from customers, and we record unearned deferred revenue when we receive prepayments or upfront payments for goods or services from our

revenues from distributors and other

contracts with customers may include promises to transfer multiple products and services to a customer, particularly when one of our

customers contracts with us for a product and related engineering services fees for customizing that product for our customer.

whether products and services are considered distinct performance obligations that should be accounted for separately may require significant

Judgment may also be required to determine the SSP for each distinct performance obligation identified, although we generally

structure our contracts such that performance obligations and pricing for each performance obligation are specifically addressed.

currently have no outstanding contracts with multiple performance obligations;

however, we recently negotiated a contract that may include

multiple performance obligations in the future.

is also required to determine when control of products passes from us to our distributors, as well as the amounts of product that may

be returned to us.

Our products are sold with a right of return, and we may provide other credits or incentives to our customers, which

could result in variability when determining the amount of revenue to recognize.

At the end of each reporting period, we use product

returns history and additional information that becomes available to estimate returns and credits.

We do not recognize revenue if it

is probable that a significant reversal of any incremental revenue would occur.

judgment is required to determine the amount of unbilled license fees at the end of each reporting period.

of revenue recognition may differ from the timing of invoicing to customers.

We record a receivable when we have an unconditional right

to receive future payments from customers, and we record unearned deferred revenue when we receive prepayments or upfront payments for

goods or services from our customers.

The following table presents

accounts receivable and deferred revenues as of September 30, 2021 and December 31, 2020 (in thousands):

September 30,

Accounts receivable and unbilled revenue

Deferred revenues

The timing of revenue recognition,

billings and cash collections results in billed accounts receivable, unbilled revenues (contract assets), and customer advances and deposits

or deferred revenue (contract liabilities) on the consolidated balance sheets.

Generally, billing occurs subsequent to revenue recognition,

resulting in contract assets;

accounts receivable and deferred revenues as of March 31, 2022 and December 31, 2021 (in thousands):

Accounts receivable and unbilled revenue, net

Contract liabilities (deferred revenues)

timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenues (contract assets),

and customer advances and deposits or deferred revenue (contract liabilities) on the consolidated balance sheets.

Generally, billing

occurs subsequent to revenue recognition, resulting in contract assets;

contract assets are generally classified as current.

The Company sometimes receives advances or deposits

from its customers before revenue is recognized, which are reported as contract liabilities and are generally classified as current.

assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

sometimes receives advances or deposits from its customers before revenue is recognized, which are reported as contract liabilities and

are generally classified as current.

These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract

basis at the end of each reporting period.

We do not anticipate impairment

of our contract asset related to license fee revenues, given the creditworthiness of our customers whose invoices comprise the balance

of our contract assets related to license fee revenues, given the creditworthiness of our customers whose invoices comprise the balance

in that asset account.

We will continue to monitor the timeliness of receipts from those customers, however, to assess whether the contract

asset has been impaired.

The allowance for doubtful

accounts reflects our best estimate of probable losses inherent in the accounts receivable balance.

We determine the allowance based on

known troubled accounts, historical experience, and other currently available evidence.

Our allowance for doubtful accounts was approximately

$ 79,000 as of September 30, 2021 and December 31, 2020.

Payment terms and conditions

vary by the type of contract;

however, payments generally occur 30-60 days after invoicing for license fees and TSMs to our resellers

and distributors.

Where revenue recognition timing differs from invoice timing, we have determined that our contracts do not include a

significant financing component.

Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers,

not to receive financing from our customers.

Costs to Obtain Contracts

We record the incremental

costs of obtaining a contract with a customer as an asset, if we expect the benefit of those costs to cover a period greater than one

We currently have no incremental costs that must be capitalized.

We expense as incurred costs

of obtaining a contract when the amortization period of those costs would have been less than or equal to one year.

Product Warranty

The following table summarizes

the activity related to the product warranty liability (in thousands):

September 30,

We will continue to monitor the timeliness of receipts from those customers to assess whether the contract assets

have been impaired.

terms and conditions vary by the type of contract;

however, payments generally occur 30-60 days after invoicing for license fees and

sensor modules to our resellers and distributors.

Where revenue recognition timing differs from invoice timing, we have determined that

our contracts do not include a significant financing component.

Our intent is to provide our customers with consistent invoicing terms

for the convenience of our customers, not to receive financing from our customers.

to Obtain Contracts

We record the incremental costs of obtaining a contract with a customer

as a contract asset, if we expect the benefit of those costs to cover a period greater than one year.

We currently have no incremental

costs that must be capitalized.

expense as incurred costs of obtaining a contract when the amortization period of those costs would have been less than or equal to one

following table summarizes the activity related to the product warranty liability (in thousands):

Balance at beginning of period

1 unchanged sentence

Balance at end of period

The Company accrues for warranty

costs as part of its cost of sales of TSMs based on estimated costs.

The Company’s products are generally covered by a warranty

for a period of 12 months from the customer receipt of the product.

Company accrues for warranty costs as part of its cost of sales of TSMs based on estimated costs.

The Company’s products are generally

covered by a warranty for a period of 12 months from the customer receipt of the product.

Contract liabilities

Contract liabilities (deferred revenues) consist primarily of prepayments

for license fees, and other products or services that we have been paid in advance.

We earn the revenue when we transfer control of the

product or service.

Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as

non-recurring engineering services.

defer license fees until we have met all accounting requirements for revenue recognition, which is when a license is made available to

a customer and that customer has a right to use the license.

Non-recurring engineering fee revenues are deferred until engineering services

have been completed and accepted by our customers.

following table presents our deferred revenues by source (in thousands):

Deferred revenues

Deferred revenues consist

primarily of prepayments for license fees, and other products or services for which we have been paid in advance and earn the revenue

when we transfer control of the product or service.

Deferred revenues may also include upfront payments for consulting services to be

performed in the future, such as non-recurring engineering services.

We defer license fees until

we have met all accounting requirements for revenue recognition, which is when a license is made available to a customer and that customer

has a right to use the license.

Engineering development fee revenues are deferred until engineering services have been completed and accepted

by our customers.

The following table presents

our deferred revenues (in thousands):

September 30,

Deferred revenues license fees

Deferred revenues products

Deferred revenues non-recurring engineering

During the three and nine

months ended September 30, 2021, the Company recognized revenues of approximately $ 0 and $ 26,000 , respectively, related to contract liabilities

outstanding at the beginning of the year.

revenues non-recurring engineering

During the three months ended

March 31, 2022, the Company recognized revenues of approximately $ 9,000 related to contract liabilities outstanding at the beginning of

Advertising costs are expensed

Advertising costs for the three and nine months ended September 30, 2021 and 2020 amounted to approximately $ 12,000 and $ 70,000

and $ 27,000 and $ 43,000 , respectively.

Research and Development

Research and development (“R&D”)

costs are expensed as incurred.

R&D costs consist primarily of personnel related costs in addition to external consultancy costs such

as testing, certifying and measurements.

Stock-Based Compensation Expense

We measure the cost of employee

services received in exchange for an award of equity instruments, including share options, based on the estimated fair value of the award

on the grant date, and recognize the value as compensation expense over the period the employee is required to provide services in exchange

for the award, usually the vesting period.

We account for equity instruments

issued to non-employees at their estimated fair value.

When determining stock-based

compensation expense involving options and warrants, we determine the estimated fair value of options and warrants using the Black-Scholes

option pricing model.

Noncontrolling Interests

We recognize any noncontrolling

interest, also known as a minority interest, as a separate line item in equity in the consolidated financial statements.

A noncontrolling

interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us.

Generally, any interest

that represents less than 50 % of the outstanding voting shares of an entity is deemed to be a noncontrolling interest;

however, there

are other factors, such as decision-making rights, that are considered as well.

We include the amount of net income (loss) attributable

to noncontrolling interests in consolidated net income (loss) on the face of the consolidated statements of operations.

The Company provides either

in the condensed consolidated statement of stockholders’ equity, if presented, or in the notes to condensed consolidated financial

statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net

assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

Advertising costs for the three months ended March 31, 2022 and 2021 amounted to approximately $ 46,000 and $ 19,000 , respectively.

and Development

and development (“R&D”) costs are expensed as incurred.

R&D costs consist primarily of personnel related costs in

addition to external consultancy costs such as testing, certifying and measurements.

Compensation Expense

measure the cost of employee services received in exchange for an award of equity instruments, including share options, based on the

estimated fair value of the award on the grant date, and recognize the value as compensation expense over the period the employee is

required to provide services in exchange for the award, usually the vesting period.

account for equity instruments issued to non-employees at their estimated fair value.

determining stock-based compensation expense involving options and warrants, we determine the estimated fair value of options and warrants

using the Black-Scholes option pricing model.

Noncontrolling

We recognize any noncontrolling interest, also known as a minority

interest, as a separate line item in stockholders’ equity in the consolidated financial statements.

A noncontrolling interest represents

the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us.

Generally, any interest that holds less

than 50 % of the outstanding voting shares is deemed to be a noncontrolling interest;

however, there are other factors, such as decision-making

rights, that are considered as well.

We include the amount of net income (loss) attributable to noncontrolling interests in consolidated

net income (loss) on the face of the consolidated statements of operations.

Company provides either in the condensed consolidated statement of stockholders’ equity, if presented, or in the notes to condensed

consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity

(net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that

separately discloses:

Net income or loss;

Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners;

Each component of other comprehensive income or loss.

We recognize deferred

tax liabilities and assets for the expected future tax consequences of items that have been included in our consolidated financial

statements or tax returns.

Transactions with owners

acting in their capacity as owners, showing separately contributions from and distributions to owners;

Each component of other

comprehensive income or loss.

recognize deferred tax liabilities and assets for the expected future tax consequences of items that have been included in the consolidated

financial statements or tax returns.

We estimate income taxes based on rates in effect in each of the jurisdictions in which we operate.

Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax

bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

realization of deferred tax assets is based on historical tax positions and expectations about future taxable income.

allowances are recorded against net deferred tax assets when, in our opinion, realization is uncertain based on the “more

likely than not” criteria of the accounting guidance.

Based on the uncertainty of

future pre-tax income, we fully reserved our net deferred tax assets as of September 30, 2021 and December 31, 2020.

In the event we were

to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase

income in the period such determination was made.

The provision for income taxes represents the net change in deferred tax amounts, plus

income taxes paid or payable for the current period.

We follow U.S.

accounting for uncertainty in income taxes, which provisions include a two-step approach to recognizing, de-recognizing and measuring

uncertainty in income taxes.

Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases

of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The realization

of deferred tax assets is based on historical tax positions and expectations about future taxable income.

Valuation allowances are recorded

against net deferred tax assets when, in our opinion, realization is uncertain based on the “more likely than not” criteria

of the accounting guidance.

on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of March 31, 2022 and December 31, 2021.

In the event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred

tax asset would increase income in the period such determination was made.

The provision for income taxes represents the net change in

deferred tax amounts, plus income taxes paid or payable for the current period.

GAAP related accounting for uncertainty in income taxes, which provisions include a two-step approach to recognizing, de-recognizing

and measuring uncertainty in income taxes.

As a result, we did not recognize a liability for unrecognized tax benefits.

As of September 30, 2021 and

December 31, 2020, we had no unrecognized tax benefits.

Net Loss per Share

As of March 31,

2022 and December 31, 2021, we had no unrecognized tax benefits.

Loss per Share

Net loss per share amounts

have been computed based on the weighted average number of shares of common stock outstanding during the three and nine months ended September

30, 2021 and 2020, respectively.

Net loss per share, assuming dilution amounts from common stock equivalents, is computed based on the

weighted-average number of shares of common stock and potential common stock equivalents outstanding during the period.

The weighted-average

number of shares of common stock and potential common stock equivalents used in computing the net loss per share for the three and nine

months ended September 30, 2021 and 2020 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see

Other Comprehensive Income (Loss)

Our other comprehensive income

(loss) includes foreign currency translation gains and losses.

The cumulative amount of translation gains and losses are reflected

as a separate component of stockholders’ equity in the condensed consolidated balance sheets.

Cash Flow Information

Cash flows in foreign currencies

have been converted to U.S.

Dollars at an approximate weighted-average exchange rate for the respective reporting periods.

The weighted-average

exchange rate for the condensed consolidated statements of operations was as follows:

Nine months ended

September 30,

have been computed based on the weighted average number of shares of common stock outstanding during the three months ended March 31,

Net loss per share, assuming dilution amounts from common stock equivalents, is computed based on the weighted-average number of

shares of common stock and potential common stock equivalents outstanding during the period.

The weighted-average number of shares of

common stock and potential common stock equivalents used in computing the net loss per share for the three months ended March 31, 2022

and 2021 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 8).

Comprehensive Income (Loss)

other comprehensive income (loss) includes foreign currency translation gains and losses.

The cumulative amount of translation gains

and losses are reflected as a separate component of stockholders’ equity in the condensed consolidated balance sheets.

Flow Information

flows in foreign currencies have been converted to U.S.

Dollars at an approximate weighted-average exchange rate for the respective reporting

The weighted-average exchange rate for the condensed consolidated statements of operations was as follows:

Swedish Krona

1 unchanged sentence

Taiwan Dollar

Exchange rate for the consolidated

balance sheets was as follows:

September 30,

The exchange rate for the condensed consolidated balance sheets was

Swedish Krona

1 unchanged sentence

Taiwan Dollar

Fair Value of Financial Instruments

We disclose the estimated

fair values for all financial instruments for which it is practicable to estimate fair value.

Financial instruments including cash, accounts

receivable, accounts payable and accrued expenses are deemed to approximate fair value due to their short maturities.

New Accounting Pronouncements

In September 2016, the FASB

issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments ,

(“ASU 2016-13”), supplemented by subsequent accounting standards updates.

The new standard requires entities to measure all

expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable

and supportable forecasts.

ASU 2016-13, as amended, is scheduled to become effective for fiscal years beginning after December 15, 2023,

with early adoption permitted.

In the future, we will evaluate the impact that ASU 2016-13, as amended, will have on our consolidated

financial statements, specifically regarding our trade receivables;

however, we do not expect any significant impact from implementation

of the new standard at this time.

In December 2019, the FASB

issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Tax , which simplifies the accounting for income

We adopted ASU 2019-12 on January 1, 2021 and the adoption of this ASU did not have a significant impact on our consolidated financial

Value of Financial Instruments

disclose the estimated fair values for all financial instruments for which it is practicable to estimate fair value.

Financial instruments

including cash, accounts receivable, accounts payable and accrued expenses are deemed to approximate fair value due to their short maturities.

Accounting Pronouncements

September 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial

Instruments, (“ASU 2016-13”), supplemented by subsequent accounting standards updates.

The new standard requires entities

to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions

and reasonable and supportable forecasts.

ASU 2016-13, as amended, is scheduled to become effective for fiscal years beginning after

December 15, 2023, with early adoption permitted.

In the future, we will evaluate the impact that ASU 2016-13, as amended, will have

on our consolidated financial statements, specifically regarding our trade receivables;

however, we do not expect any significant impact

from implementation of the new standard.

Stockholders’ Equity

At-the-Market Facility

At-the-Market

May 10, 2021, we entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with B.

Riley Securities with

respect to, under which we may, from time to time, in our sole discretion, issue and sell through B.

Riley Securities, acting as sales

agent, up to $ 25.0 million of shares of our common stock through the ATM Facility.

Pursuant to the Sale Agreement, we may sell the shares through B.

Securities by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities

Act of 1933, as amended.

Riley Securities will use commercially reasonable efforts consistent with its normal trading and sales practices

to sell the shares from time to time, based upon instructions from us (including any price or size limits or other customary parameters

or conditions we may impose).

Riley Securities, Inc.

Riley Securities”) with respect to an “at the market” offering program (the “ATM Facility”),

under which we may, from time to time, in our sole discretion, issue and sell through B.

Riley Securities, acting as sales agent, up

to $ 25 million of shares of our common stock.

to the Sale Agreement, we may sell the shares through B.

Riley Securities by any method permitted that is deemed an “at the market”

offering as defined in Rule 415 under the Securities Act of 1933, as amended.

Riley Securities will use commercially reasonable efforts

consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from us (including

any price or size limits or other customary parameters or conditions we may impose).

We will pay B.

Riley Securities a commission of 3.0 % of the gross sales price per share sold under the Sales

Riley Securities a commission of

3.0 % of the gross sales price per share sold under the Sales Agreement.

are not obligated to sell any shares under the Sale Agreement.

3 unchanged sentences

(ii) termination of the Sale Agreement in accordance with its terms.

2020 Private Placement

On August 7, 2020, we closed

a private placement (the “Private Placement”) with certain institutional and accredited investors.

We issued a total of 1,611,845

shares of common stock at a price of $ 6.50 per share, and a total of 365 shares of Series C-1 Preferred Stock and 3,050 shares of Series

C-2 Preferred Stock, each with a conversion price of $ 6.50 per share and a stated value of $ 1,000 per share, for approximately $ 13.9 million

in aggregate gross proceeds.

At our annual meeting of stockholders

held on September 29, 2020, stockholders approved a proposal to increase the number of authorized shares of our common stock to 25,000,000

Accordingly, on November 5, 2020, we filed an amendment to the Neonode Inc.

Restated Certificate of Incorporation, as amended

(our “Certificate of Incorporation”), with the Secretary of State of the State of Delaware to increase the number of authorized

our annual meeting of stockholders held on September 29, 2020, stockholders approved a proposal to increase the number of authorized

shares of our common stock to 25,000,000 shares.

On December 29, 2020, we issued

37,288 shares of our common stock to key employees pursuant to our 2020 long-term incentive program (“2020 LTIP”) (see Note

On August 12, 2021, we issued

12,830 shares of our common stock to key employees pursuant to our 2020 LTIP (see Note 4).

During the three and nine

months ended September 30, 2021, we sold an aggregate of 93,553 shares of common stock under the ATM Facility, resulting in net proceeds

to us of approximately $ 593,000 after payment of commissions to B.

Riley of $ 18,000 .

Preferred Stock

On August 6, 2020, in connection with the closing of the Private Placement,

we designated (i) 365 shares of our authorized and unissued preferred stock as Series C-1 Preferred Stock by filing a Series C-1 Certificate

of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware and (ii) 4,084 shares of our

authorized and unissued preferred stock as Series C-2 Preferred Stock by filing a Series C-2 Certificate of Designation of Preferences,

Rights and Limitations with the Secretary of State of the State of Delaware.

On September 24 and 29, 2020, respectively, the Series C-1 Preferred

Stock and Series C-2 Preferred Stock (together, the “Series C Preferred Shares”) were converted into an aggregate of 684,378

shares of Neonode common stock.

The holders of the Series

C-1 and C-2 Preferred Shares were entitled to receive dividends at the rate per share of 5 % per annum, totaling $ 33,000 .

As of December

31, 2020, all of the preferred dividends had been paid.

On December 7, 2020, we filed

Certificates of Elimination with the Secretary of State of the State of Delaware to eliminate the Series A Preferred Stock, Series B Preferred

Stock, Series C-1 Preferred Stock and Series C-2 Preferred Stock.

Accordingly, on November 5, 2020, we filed an amendment to the Neonode Inc.

Certificate of Incorporation, as amended (our “Certificate of Incorporation”), with the Secretary of State of the State of

Delaware to increase the number of authorized shares of our common stock to 25,000,000 shares.

December 29, 2020, we issued 37,288 shares of our common stock to key employees pursuant to our 2020 long-term incentive program (“2020

LTIP”) (see Note 4).

August 12, 2021, we issued 12,830 shares of our common stock to key employees pursuant to our 2020 LTIP (see Note 4).

December 29, 2021, we issued 14,735 shares of our common stock to key employees pursuant to our 2020 LTIP (see Note 4).

During the twelve months ended

December 31, 2021, we sold an aggregate of 235,722 shares of common stock under the ATM Facility, resulting in net proceeds to us of approximately

$ 1,984,000 after payment of commissions to B.

Riley Securities and other expenses of $ 66,000 .

October 21, 2021, we entered into a placement agency agreement with Pareto Securities Inc.

and Pareto Securities AB pursuant to which

we sold to certain Swedish and other European investors an aggregate of 1,808,000 shares of our common stock at a price of $ 7.75 per

share in a registered direct offering that closed on October 26, 2021 (the “Offering”).

We received net proceeds of approximately

$ 13.1 million from the Offering after deducting placement agent fees and offering expenses.

There were no transactions

in our preferred stock during the three and nine months ended September 30, 2021 and 2020.

No shares of preferred stock were issued and

outstanding as of September 30, 2021.

Details of the preferred stock

activities are set forth below:

Shares Issued

Balances, December 31, 2019

Issuance of Preferred Shares for cash

Series C-2 Preferred Stock issued for repayment of short-term borrowings and accrued interest

Conversion of Preferred Shares to common stock

Balances, December 31, 2020

As of September 30, 2021 and

December 31, 2020, the Company had outstanding warrants to purchase 431,638 shares of common stock outstanding.

in our preferred stock during the three months ended March 31, 2022 and 2021.

No shares of preferred stock were issued and outstanding

as of March 31, 2022.

As of March 31, 2022 and December

31, 2021, the Company had outstanding warrants to purchase zero and 431,368 shares of common stock, respectively.

During the three months

ended March 31, 2022, 431,368 warrants expired and no warrants were exercised.

Stock-Based Compensation

We have adopted equity incentive

plans under which we may grant stock options and restricted stock awards to employees, consultants and directors.

Except for certain options

granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an

exercise price equal to the market value of the underlying common stock on the grant date.

There are no vesting provisions tied to performance

conditions for any options, as vesting for all outstanding option grants was based solely on continued service as an employee, consultant

plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors.

Except for certain

options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans

have an exercise price equal to the market value of the underlying common stock on the grant date.

There are no vesting provisions tied

to performance conditions for any options.

Vesting for all outstanding option grants is based solely on continued service as an employee,

consultant or director.

All of our outstanding stock options and restricted stock awards are classified as equity instruments.

Stock Options

During the year ended December 31, 2020, our stockholders approved

the Neonode Inc.

2020 Stock Incentive Plan (the “2020 Plan”), which replaced our 2015 Stock Incentive Plan (the “2015

Plan”), which in turn replaced our Neonode Inc.

During the year ended December

31, 2020, our stockholders approved the Neonode Inc.

2020 Stock Incentive Plan (the “2020 Plan”) which replaced our 2015 Stock

Incentive Plan (the “2015 Plan”), which in turn replaced our Neonode Inc.

2006 Equity Incentive Plan (the “2006 Plan”).

Although no new awards

may be made under the 2015 or 2006 Plans, these plans are still operative for awards previously granted under those plans.

Under the 2020

Plan, 750,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants

to officers, employees, non-employee directors and consultants.

The terms of the awards granted under the 2020 Plan are set by our compensation

committee at its discretion.

In 2020 we established the

2020 LTIP to provide eligible persons with the opportunity to acquire an equity interest, or otherwise increase their equity interest,

in the Company as an incentive for them to remain in the service of the Company.

Under the 2020 LTIP, eligible employees of Neonode may

waive between 50 % to 67 % of any future unearned bonuses that may be awarded to them under the Company’s annual bonus arrangement

in exchange for the grant of shares of the Company’s common stock under the Company’s 2020 Plan.

On December 29, 2020, we issued

37,288 shares of common stock to key employees pursuant to the 2020 LTIP.

The shares were immediately vested but subject to a two-year

lock-up period after issuance.

In the event the participant’s employment with the Company is terminated by the participant during

the two-year lock-up period, the Company will repurchase the shares at a price equal to 30 % of the lower of market value at issuance and

the termination date.

The shares issued on December 29, 2020 represent two-thirds of the total shares available for issuance to these

employees under the 2020 LTIP and the last one-third is planned to be issued at the end of December 2021.

On August 12, 2021, we issued

12,830 shares of common stock to a key employee pursuant to the 2020 LTIP.

The shares were immediately vested but subject to a two-year

lock-up period after issuance.

In the event the participant’s employment with the Company is terminated by the participant during

the two-year lock-up period, the Company will repurchase the shares at a price equal to 30 % of the lower of market value at issuance and

the termination date.

The shares issued on August 12, 2021 represent two-thirds of the total shares available for issuance under the 2020

LTIP to this employee and the last one-third is planned to be issued at the end of December 2021.

The Company has reported and

paid Swedish social charges of $ 75,000 for the issued shares but only 30 % of the stock-based compensation (totaling $ 77,000 ) was included

in the consolidated statements of operations for the year ended December 31, 2020, with the remainder to be recognized ratably over the

two-year lock-up period.

The Company has reported and

paid Swedish social charges of $ 21,000 for the issued shares but only 30 % and two twenty-fourth of 70 % of the stock-based compensation

(totaling $ 25,000 ) was included in the consolidated statements of operations for the three and nine months ended September 30, 2021, with

the remainder to be recognized ratably over the remainder of the two-year lock-up period.

For the three and nine months

ended September 30, 2021, $ 46,000 and $ 91,000 , respectively, of stock-based compensation was included in our condensed consolidated statements

of operations.

Unrecognized compensation expense related to the 2020 LTIP as of September 30, 2021 was $ 156,000 , which will be recognized

over two years from issuance of the shares of common stock.

A summary of the combined

activity under all of our stock option plans is set forth below:

Although no new awards may be made under the 2006 Plan or 2015 Plan, the 2015 Plan is still operative for awards previously granted under

There are no awards outstanding under the 2006 Plan.

Under the 2020 Plan, 750,000 shares of common stock have been reserved

for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and

The terms of the awards granted under the 2020 Plan are set by our compensation committee at its discretion.

2020 we established the Neonode Inc.

2020 Long Term Incentive Plan (the “2020 LTIP”) to provide eligible persons with the

opportunity to acquire an equity interest, or otherwise increase their equity interest, in the Company as an incentive for them to remain

in the service of the Company.

Through the 2020 LTIP, eligible employees of Neonode may waive between 50 % to 67 % of future unearned bonuses

that may be awarded to them under the Company’s annual bonus arrangement in exchange for the grant of shares of the Company’s

common stock.

December 29, 2020, we issued 37,288 shares of common stock to key employees pursuant to the 2020 LTIP.

The shares were immediately vested

but subject to a two-year lock-up period after issuance.

In the event the participant’s employment with Neonode is terminated by

the participant during the two-year lock-up period, the Company will repurchase the shares at a price equal to 30 % of the lower of market

value at issuance and termination date.

Neonode has reported and paid Swedish social charges of $ 75,000 for the issued shares but only

30 % of the stock-based compensation (totaling $ 77,000 ) was recognized immediately in the consolidated statement of operations for the

year ended December 31, 2020, with the remainder to be recognized ratably over the two-year lock-up period.

August 12, 2021, we issued 12,830 shares of common stock to a key employee pursuant to the 2020 LTIP.

The shares were immediately vested

but subject to a two-year lock-up period after issuance.

In the event the participant’s employment with the Company is terminated

by the participant during the two-year lock-up period, the Company will repurchase the shares at a price equal to 30 % of the lower of

market value at issuance and the termination date.

The Company has reported and paid Swedish social charges of $ 21,000 for the issued

shares but only 30 % of the stock-based compensation (totaling $ 25,000 ) was recognized immediately in the consolidated statements of operations

for the year ended December 31, 2021, with the remainder to be recognized ratably over the two-year lock-up period.

December 29, 2021, we issued 14,735 shares of common stock to key employees pursuant to the 2020 LTIP.

The shares were immediately vested

but subject to a two-year lock-up period after issuance.

In the event the participant’s employment with Neonode is terminated by

the participant during the two-year lock-up period, the Company will repurchase the shares at a price equal to 30 % of the lower of market

value at issuance and termination date.

Neonode has reported and paid Swedish social charges of $ 46,000 for the issued shares but only

30 % of the stock-based compensation (totaling $ 38,000 ) was recognized immediately in the consolidated statements of operations for the

year ended December 31, 2021, with the remainder to be recognized ratably over the two-year lock-up period.

For the three months ended

March 31, 2022 and 2021, we recognized $ 39,000 and $ 23,000 , respectively, of stock-based compensation for the amortization of the 2020

LTIP over the respective lock-up periods.

summary of the combined activity under all of our stock option plans is set forth below:

Outstanding at January 1, 2022

Outstanding at September 30, 2021

The aggregate intrinsic value

of the 9,500 stock options that are outstanding, vested and expected to vest as of September 30, 2021 was $ 0 .

For the three and nine months

ended September 30, 2021 and 2020, we recorded no compensation expense related to the vesting of stock options.

During the three and nine

months ended September 30, 2021, we did not grant any options to purchase shares of our common stock to employees or members of our board

of directors.

Stock options granted under the 2006, 2015 and 2020 Plans are exercisable

over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise

prices reflecting the market value of the shares of common stock on the date of grant.

Outstanding at March 31, 2022

aggregate intrinsic value of the 2,500 stock options that are outstanding, vested and expected to vest as of March 31, 2022 was $ 0 .

the three months ended March 31, 2022 and 2021, we recorded no compensation expense related to the vesting of stock options.

the three months ended March 31, 2022, we did not grant any options to purchase shares of our common stock to employees or members of

our board of directors.

Stock options granted under

the 2006, 2015 and 2020 Plans are exercisable over a maximum term of 10 years from the date of grant, vest in various installments over

a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.

Commitments and Contingencies

On September 2, 2020, a putative

stockholder of Neonode filed a purported class action lawsuit (Case No.

1:20-cv-01174-UNA) in the United States District Court for the

District of Delaware against Neonode, the Board of Directors of Neonode, and the Chief Executive Officer of Neonode for alleged violation

of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, in connection with disclosure of information concerning

Proposal 5 and Proposal 6 in the proxy statement filed with the SEC by Neonode on August 20, 2020 for the 2020 Annual Meeting of Stockholders

of Neonode (the “Proxy Statement”).

These proposals for shareholder approval related to the Private Placement by Neonode on

August 5, 2020 in which two directors and the chief executive officer of Neonode participated.

The relief sought by the plaintiff included

a preliminary injunction to enjoin the stockholder votes on Proposal 5 and Proposal 6.

On October 20, 2020, the plaintiff voluntarily

dismissed the lawsuit in the United States District Court.

However, on February 11, 2021, the plaintiff’s counsel informed Neonode

that they would file a fee petition as a result of Neonode filing the definitive additional materials to the Proxy Statement on September

On September 9, 2021, the plaintiff’s counsel filed a complaint in the Supreme Court of the State of New York, County

of Nassau, to recover plaintiff’s attorneys’ fees and expenses in the amount of $ 400,000 incurred in connection with the Proceeding.

On November 3, 2021, the Company entered into a settlement agreement with plaintiff’s counsel, which was accrued for as of September

September 2, 2020, a putative stockholder of Neonode filed a purported class action lawsuit (Case No.

1:20-cv-01174-UNA) in the United

States District Court for the District of Delaware against Neonode, the Board of Directors of Neonode, and the Chief Executive Officer

of Neonode for alleged violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended, in connection with disclosure

of information concerning Proposal 5 and Proposal 6 in the proxy statement filed with the SEC by Neonode on August 20, 2020 for the 2020

Annual Meeting of Stockholders of Neonode (the “Proxy Statement”).

These proposals for shareholder approval related to the

Private Placement by Neonode on August 5, 2020 in which two directors and the chief executive officer of Neonode participated.

sought by the plaintiff included a preliminary injunction to enjoin the stockholder votes on Proposal 5 and Proposal 6.

On October 20,

2020, the plaintiff voluntarily dismissed the lawsuit in the United States District Court.

However, on February 11, 2021, the plaintiff’s

counsel informed Neonode that they would file a fee petition as a result of Neonode filing the definitive additional materials to the

Proxy Statement on September 18, 2020.

On September 9, 2021, the plaintiff’s counsel filed a complaint in the Supreme Court of

the State of New York, County of Nassau, to recover plaintiff’s attorneys’ fees and expenses in the amount of $ 400,000 incurred

in connection with the Proceeding.

On November 3, 2021, the Company entered into a settlement agreement with plaintiff’s counsel,

which was accrued for as of September 30, 2021.

On November 4, 2021, the case was dismissed with prejudice.

Indemnities and Guarantees

and Guarantees

Our bylaws require that we

8 unchanged sentences

insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal and we have no liabilities

recorded for these agreements as of September 30, 2021 and December 31, 2020.

recorded for these agreements as of March 31, 2022 and December 31, 2021.

We enter into indemnification

12 unchanged sentences

fair value of these agreements is minimal.

Accordingly, we have no liabilities recorded for these indemnification provisions as of September

Accordingly, we have no liabilities recorded for these indemnification provisions as of March

31, 2022 and December 31, 2021.

One of our manufacturing partners

has previously purchased material for the final assembly of AirBars.

To protect the manufacturer from losses in relation to AirBar production,

we agreed to secure the value of the inventory in a bank guarantee.

At September 30, 2021, the guaranteed amount is $ 100,000 and represents

the value of the remaining material in inventory at September 30, 2021.

Management’s judgment

is that the bank guarantee is a contingent guarantee and management will record a liability when it is probable that we will have to purchase

the inventory.

As of November 10, 2021, management’s judgment is that we will sell the remaining AirBars and purchase the components

and the assembly service from the manufacturing partner.

No liability has therefore been recorded for the period ended September 30, 2021.

Patent Assignment

On May 6, 2019, the Company

assigned a portfolio of patents to Aequitas Technologies LLC.

The assignment provides the Company the right to share potential proceeds

generated from a licensing and monetization program.

of our manufacturing partners has previously purchased material for the final assembly of AirBars.

To protect the manufacturer from losses

in relation to AirBar production, we agreed to secure the value of the inventory in a bank guarantee.

In December, 2021 the bank guarantee

was cancelled.

May 6, 2019, the Company assigned a portfolio of patents to Aequitas Technologies LLC.

The assignment provides the Company the right

to share potential proceeds generated from a licensing and monetization program.

On June 8, 2020, Neonode Smartphone

LLC, a subsidiary of Aequitas Technologies LLC filed complaints against Apple and Samsung in the Western District of Texas for infringing

These litigation matters are still ongoing.

Non-Recurring Engineering Development Costs

On April 25, 2013, we entered

into an Analog Device Development Agreement with an effective date of December 6, 2012 (the “NN1002 Agreement”) with Texas

Instruments (“TI”) pursuant to which TI agreed to integrate our intellectual property into an ASIC.

Under the terms of the

NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per ASIC for each of the first

two million ASICs sold.

As of September 30, 2021, we had made no payments to TI under the NN1002 Agreement.

The case against Apple was subsequently transferred to the Northern District of California.

Both matters are still ongoing.

Non-Recurring

Engineering Development Costs

April 25, 2013, we entered into an Analog Device Development Agreement with an effective date of December 6, 2012 (the “NN1002

Agreement”) with Texas Instruments (“TI”) pursuant to which TI agreed to integrate our intellectual property into an

Under the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per

ASIC for each of the first 2,000,000 ASICs sold.

As of March 31, 2022, we had made no payments to TI under the NN1002 Agreement.

Segment Information

We have one reportable segment,

which is comprised of the touch technology licensing and TSM business.

All of our sales for the three and nine months ended September

30, 2021 and 2020, respectively, were to customers located in the U.S., Europe and Asia.

The Company reports revenues from external customers

based on the country where the customer is located.

have one reportable segment, which is comprised of the touch technology licensing and products business.

We report revenues from external

customers based on the country where the customer is located.

The following table presents

net revenues by geographic area for the three and nine months ended September 30, 2021 and 2020, respectively, (dollars in thousands):

net revenues by geographic area for the three months ended March 31, 2022 and 2021, respectively (dollars in thousands):

Three months ended

September 30, 2021

March 31, 2022

Three months ended

September 30, 2020

March 31, 2021

United States

Nine months ended

September 30, 2021

Nine months ended

September 30, 2020

following table presents our total assets by geographic region as of March 31, 2022 and December 31, 2021 (in thousands):

United States

The following table presents

our total assets by geographic region as of September 30, 2021 and December 31, 2020 (in thousands):

September 30,

We have operating leases for

our corporate offices and our manufacturing facility, and finance leases for equipment.

Our leases have remaining lease terms of three

to eighteen months .

One of our primary operating leases includes options to extend the lease for one to three years and the other primary

lease includes an option to annually extend;

We have operating leases for our corporate offices and our manufacturing

facility, and finance leases for equipment.

Our leases have remaining lease terms of two months to two years.

One of our primary operating

leases includes options to extend the lease for one to three years and the other primary lease includes an option to annually prolong;

those operating leases also include options to terminate the leases within one year.

renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease

Our operating leases represent

building leases for our Stockholm corporate offices and our Kungsbacka manufacturing facility.

Our Stockholm corporate office lease has

a remaining lease term of 17 months and both of our leases are automatically renewed at a cost increase of 2% on an annual basis, unless

we provide written notice nine months prior to the respective expiration dates.

We report operating lease

right-of-use assets, as well as current and noncurrent operating lease obligations on our consolidated balance sheets for the right to

use those buildings in our business.

Future renewal options that are not likely to be

executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.

operating leases represent building leases for our Stockholm corporate offices and our Kungsbacka manufacturing facility.

Our Stockholm

corporate office lease has a remaining lease term of under one year and both of our leases are automatically renewed at a cost increase

of 2% on an annual basis, unless we provide written notice nine months prior to the respective expiration dates.

report operating lease right-of-use assets, as well as current and noncurrent operating lease obligations on our consolidated balance

sheets for the right to use those buildings in our business.

Our finance leases represent manufacturing equipment;

we report the manufacturing equipment, as well

as current and noncurrent finance lease obligations on our condensed consolidated balance sheets for our manufacturing equipment.

Generally, interest rates

are stated in our leases for equipment.

When no interest rate is stated in a lease, however, we review the interest rates implicit in

our recent finance leases to estimate our incremental borrowing rate.

We determine the rate implicit in a lease by using the most recent

finance lease rate, or other method we think most closely represents our incremental borrowing rate.

The components of lease expense

were as follows (in thousands):

September 30,

Operating lease cost (1)

Finance lease cost:

Amortization of leased assets

Interest on lease liabilities

Total finance lease cost

(1) Includes short-term lease costs of $ 41,000 and $ 117,000 for the three and nine months ended September 30, 2021, respectively.

September 30,

we report the manufacturing

equipment, as well as current and noncurrent finance lease obligations on our consolidated balance sheets for our manufacturing equipment.

interest rates are stated in our leases for equipment.

When no interest rate is stated in a lease, however, we review the interest rates

implicit in our recent finance leases to estimate our incremental borrowing rate.

We determine the rate implicit in a lease by using

the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.

components of lease expense were as follows (in thousands):

Operating lease cost (1)

3 unchanged sentences

Total finance lease cost

(1) Includes short-term lease costs of $ 30,000 and $ 81,000 for the three and nine months ended September 30, 2020, respectively.

Supplemental cash flow information

related to leases was as follows (in thousands):

September 30,

Cash paid for amounts included in leases:

Operating cash flows from operating leases

Operating cash flows from finance leases

Financing cash flows from finance leases

Right-of-use assets obtained in exchange for lease obligations:

Operating leases

(1) Includes short-term lease costs of $ 44,000 and $ 38,000 for the three months ended March 31, 2022 and 2021, respectively.

cash flow information related to leases was as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cash paid for amounts included in leases:

4 unchanged sentences

Operating leases

Supplemental balance sheet

information related to leases was as follows (in thousands):

September 30,

balance sheet information related to leases was as follows (in thousands):

Operating leases

10 unchanged sentences

Total finance lease liabilities

September 30,

Weighted Average Remaining Lease Term

5 unchanged sentences

(2) Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019

A summary of future minimum

payments under non-cancellable operating lease commitments as of September 30, 2021 is as follows (in thousands):

Years ending December 31,

summary of future minimum payments under non-cancellable operating lease commitments as of March 31, 2022 is as follows (in thousands):

Year ending December 31,

2022 (remaining months)

2 unchanged sentences

Less current portion

The following is a schedule

of minimum future rentals on the non-cancellable finance leases as of September 30, 2021 (in thousands):

following is a schedule of minimum future rentals on the non-cancellable finance leases as of March 31, 2022 (in thousands):

Year ending December 31,

5 unchanged sentences

Net Loss per Share

Basic net loss per common share for the three and nine months ended

September 30, 2021 and 2020 was computed by dividing the net loss attributable to Neonode for the relevant period by the weighted average

number of shares of common stock outstanding.

Diluted loss per common share is computed by dividing net loss attributable to Neonode by

the weighted average number of shares of common stock and common stock equivalents outstanding.

There were no potentially

dilutive common stock equivalents for the three and nine months ended September 30, 2021 and 2020, respectively.

net loss per common share for the three months ended March 31, 2022 and 2021 was computed by dividing the net loss attributable to common

shareholders of Neonode Inc.

for the relevant period by the weighted average number of shares of common stock outstanding.

per common share is computed by dividing net loss attributable to common shareholders of Neonode Inc.

for the relevant period by the

weighted average number of shares of common stock and common stock equivalents outstanding.

were no potentially dilutive common stock equivalents for the three months ended March 31, 2022 and 2021, respectively.

(in thousands, except per share amounts)

Three months ended

September 30,

BASIC AND DILUTED

2 unchanged sentences

Net loss per share - basic and diluted

(in thousands, except per share amounts)

Nine months ended

September 30,

BASIC AND DILUTED

Weighted average number of common shares outstanding

Net loss attributable to Neonode Inc.

Net loss per share - basic and diluted

Subsequent Events

During October 2021, we sold

an aggregate of 142,169 shares under the ATM Facility with aggregate net proceeds to us of $ 1,396,000 after payment of commissions to

Riley Securities of $ 43,000 .

On October 21, 2021, we entered

into a placement agency agreement with Pareto Securities Inc.

and Pareto Securities AB pursuant to which we sold to certain Swedish and

other European investors an aggregate of 1,808,000 shares of our common stock at a price of $7.75 per share in a registered direct offering

that closed on October 26, 2021.

We received net proceeds of approximately $13.1 million from the Offering after deducting placement agent

fees and offering expenses.

No other subsequent events

have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes thereto other

than as discussed elsewhere in the accompanying notes.

other subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure

in the notes thereto other than as discussed elsewhere in the accompanying notes.

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

What changed 10-Q

Item 1. Financial Statements