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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 738 added, 554 removed, 290 unchanged (82% of the section changed)

Financial Statements

CONSOLIDATED BALANCE SHEETS

thousands, except share and per share amounts)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

Current assets:

Cash and cash equivalents

Accounts receivable and unbilled revenues, net

18 unchanged sentences

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

15,359,481 and 14,455,765 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

15,359,481 and 14,455,765 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

3 unchanged sentences

Total liabilities and stockholders’ equity

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except per share amounts)

The accompanying notes are an integral part of

these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

Three months ended

Six months ended

Non-recurring engineering

12 unchanged sentences

Interest income (expense), net

Total other income (expense)

Total other income, net

Loss before provision for income taxes

6 unchanged sentences

Basic and diluted – weighted average number of common shares outstanding

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

comprehensive income (loss):

currency translation adjustments

The accompanying notes are an integral part of

these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE

(In thousands)

Three months ended

Six months ended

Other comprehensive income (loss):

Foreign currency translation adjustments

Other comprehensive loss

1 unchanged sentence

Other comprehensive loss attributable to Neonode Inc.

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2023 and

The accompanying notes are an integral part of

these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(In thousands)

For the three and six months ended June 30,

2023 and 2022

Comprehensive

9 unchanged sentences

$ ( 208,916 )

Stock-based compensation

Foreign currency translation adjustment

Balances, June 30, 2023

$ ( 210,423 )

Comprehensive

8 unchanged sentences

$ ( 203,988 )

accompanying notes are an integral part of these condensed consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Stock-based compensation

Foreign currency translation adjustment

Balances, June 30, 2022

$ ( 205,536 )

The accompanying notes are an integral part of

these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Six months ended

Cash flows from operating activities:

4 unchanged sentences

Amortization of operating lease right-of-use assets

Recoveries of bad debt

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets

Accounts payable, accrued payroll and employee benefits, and accrued

Accounts payable, accrued payroll and employee benefits, and accrued expenses

Contract liabilities

8 unchanged sentences

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash

Net change in cash

Cash at beginning of period

Cash at end of period

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

1 unchanged sentence

Cash paid for interest

accompanying notes are an integral part of these condensed consolidated financial statements.

to the Condensed Consolidated Financial Statements

Supplemental disclosure of non-cash investing and financial activities:

Property and equipment obtained in exchange for lease obligations

The accompanying notes are an integral part of

these condensed consolidated financial statements.

Notes to the Condensed Consolidated Financial

Interim Period Reporting

accompanying unaudited interim condensed consolidated financial statements include all adjustments consisting of normal recurring adjustments

that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash

flows for the interim period presented.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative

of results for a full fiscal year or any other period.

accompanying condensed consolidated financial statements for the three months ended March 31, 2023 and 2022 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.

The accompanying unaudited

interim condensed consolidated financial statements include all adjustments consisting of normal recurring adjustments that are, in the

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 six months ended June 30, 2023 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 six months ended June 30, 2023 and 2022 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 of

America (“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, 2022.

Inc., which is collectively with its subsidiaries referred to as “Neonode” or the “Company” in this report, develops

advanced optical sensing solutions for contactless touch, touch, gesture sensing, and object detection and machine perception solutions

using advanced machine learning algorithms to detect and track persons and objects in video streams for cameras and other types of imagers.

We market and sell our contactless touch, touch, and gesture sensing, and object detection 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, office equipment, automotive, industrial automation, medical, military

and avionics.

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, 2022.

Neonode Inc., which is collectively

with its subsidiaries referred to as “Neonode” or the “Company” in this report, develops advanced optical sensing

solutions for contactless touch, touch, gesture sensing, and object detection and machine perception solutions using advanced machine

learning algorithms to detect and track persons and objects in video streams for cameras and other types of imagers.

We market and sell

our contactless touch, touch, and gesture sensing, and object detection 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, office equipment, automotive, industrial automation, medical, military and avionics.

In our operations, we have

11 unchanged sentences

The Company incurred net losses of approximately $ 1.5 million

for each of the three months ended March 31, 2023 and 2022, and had an accumulated deficit of approximately $ 208.9 million and $ 207.5

million as of March 31, 2023 and December 31, 2022, respectively.

In addition, operating activities used cash of approximately $ 1.7 million

and $ 2.3 million for the three months ended March 31, 2023 and 2022, respectively.

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

of the Company’s operating loss and determined that the Company’s current operating plan and sources of potential capital

(including the Company’s at-the-market facility described below) would be sufficient to alleviate concerns about the Company’s

and $ 2.9 million and $ 1.5 million and $ 2.9 million for the three and six months ended June 30, 2023 and 2022, respectively, and had an

accumulated deficit of approximately $ 210.4 million and $ 207.5 million as of June 30, 2023 and December 31, 2022, respectively.

operating activities used cash of approximately $ 2.3 million and $ 5.2 million for the six months ended June 30, 2023 and 2022, 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 has evaluated the

significance of the Company’s operating loss and has determined that the Company’s current operating plan and sources of potential

capital (including the Company’s at-the-market facility described below) are sufficient to alleviate concerns about the Company’s

ability to continue as a going concern.

During the three months ended March 31, 2023, the Company sold an aggregate of 903,716 shares

of its common stock under the at-the-market facility with aggregate net proceeds to the Company of $ 7,866,000 , after payment of commissions

During the six months ended June 30, 2023, the Company sold an aggregate of 903,716 shares of

its common stock under the at-the-market facility with aggregate net proceeds to the Company of $ 7,866,000 , after payment of commissions

Riley Securities, the agent for the at-the-market facility, and other expenses of $ 244,000 .

the future, we may require additional sources of capital to continue operations and to implement our strategy.

If our operations do not

become cash flow positive, we may be forced to seek equity investments or debt arrangements.

No assurances can be given that we will

be successful in obtaining such additional financing on reasonable terms, or at all.

If adequate funds are not available to us on acceptable

terms, or at all, we may be unable to adequately fund our business plans, which could have a negative effect on our business, results

of operations and financial condition.

If funds are available through the issuance of equity or debt securities, the issuance of equity

securities or 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 on us that could impair our ability to engage in certain business

transactions.

expect revenues will enable us to reduce our operating losses in coming years.

In addition, we intend to continue to implement various

measures to improve our operational efficiencies.

No assurances can be given that management will be successful in meeting its revenue

targets and reducing its operating loss.

In the future, we may require

additional sources of capital to continue operations and to implement our strategy.

If our operations do not become cash flow positive,

we may be forced to seek equity investments or debt arrangements.

No assurances can be given that we will be successful in obtaining such

additional financing on reasonable terms, or at all.

If adequate funds are not available to us on acceptable terms, or at all, we may

be unable to adequately fund our business plans, which could have a negative effect on our business, results of operations and financial

If funds are available through the issuance of equity or debt securities, the issuance of equity securities or 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 on us that could impair our ability to engage in certain business transactions.

We expect revenues will enable

us to reduce our operating losses in coming years.

In addition, we intend to continue to implement various measures to improve our operational

efficiencies.

No assurances can be given that management will be successful in meeting its revenue targets and reducing its operating

Summary of Significant Accounting Policies

of Consolidation

The condensed

consolidated financial statements have been prepared in accordance with U.S.

Principles of Consolidation

The condensed consolidated

financial statements have been prepared in accordance with U.S.

GAAP and include the accounts of Neonode Inc.

wholly-owned subsidiaries, as well as Pronode Technologies AB, a 51 % majority-owned subsidiary of Neonode Technologies AB, until

September 30, 2022.

On October 1, 2022, the remaining 49 % of Pronode Technologies AB was acquired from Propoint AB, located in

Gothenburg, Sweden.

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

consolidates entities in which it has a controlling financial interest.

We consolidate subsidiaries in which we hold, directly or indirectly,

more than 50 % of the voting rights.

condensed consolidated balance sheets at March 31, 2023 and December 31, 2022 and the condensed consolidated statements of operations,

comprehensive loss, stockholders’ equity and cash flows for the three months ended March 31, 2023 and 2022 include our accounts

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

and Judgments

preparation of financial statements in conformity with U.S.

GAAP requires making estimates and judgments that affect, at the date of

the financial statements, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported

amounts of revenue and expenses.

and its wholly-owned subsidiaries,

as well as Pronode Technologies AB, a 51 % majority-owned subsidiary of Neonode Technologies AB, until September 30, 2022.

On October 1,

2022, the remaining 49 % of Pronode Technologies AB was acquired from 2X Communication AB, located in Gothenburg, Sweden.

All inter-company

accounts and transactions have been eliminated in consolidation.

Neonode consolidates entities

in which it has a controlling financial interest.

We consolidate subsidiaries in which we hold, directly or indirectly, more than 50 %

of the voting rights.

The condensed consolidated

balance sheets at June 30, 2023 and December 31, 2022 and the condensed consolidated statements of operations, comprehensive loss, stockholders’

equity and cash flows for the three and six months ended June 30, 2023 and 2022 include our accounts and those of our wholly-owned subsidiaries

as well as Pronode Technologies AB.

Estimates and Judgments

The preparation of financial

statements in conformity with U.S.

GAAP requires making estimates and judgments that affect, at the date of the financial statements,

the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and

Actual results could differ from these estimates and judgments.

estimates and judgments include, but are not limited to:

for revenue recognition, determining the nature and timing of satisfaction of

performance obligations, the standalone selling price of performance obligations, and transaction prices and assessing transfer of control;

measuring variable consideration and other obligations such as product returns and refunds, and product warranties;

provisions for uncollectible

Significant estimates and

judgments include, but are not limited to:

for revenue recognition, determining the nature and timing of satisfaction of performance obligations,

the standalone selling price of performance obligations, and transaction prices and assessing transfer of control;

measuring variable

consideration and other obligations such as product returns and refunds, and product warranties;

provisions for uncollectible receivables;

determining the net realizable value of inventory;

recoverability of capitalized project costs and long-lived assets;

leases, determining whether a contract contains a lease, allocating consideration between lease and non-lease components, determining

incremental borrowing rates, and identifying reassessment events, such as modifications;

the valuation allowance related to our deferred

and the fair value of options issued as stock-based compensation.

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

for leases, determining

whether a contract contains a lease, allocating consideration between lease and non-lease components, determining incremental borrowing

rates, and identifying reassessment events, such as modifications;

the valuation allowance related to our deferred tax assets;

fair value of options issued as stock-based compensation.

Cash and Cash Equivalents

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 and cash equivalents

balances are maintained at various banks in the United States, Japan, Taiwan and Sweden.

6 unchanged sentences

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.

At times, deposits held with financial institutions

may exceed the amount of insurance provided.

Receivable and Credit Losses

10 unchanged sentences

analysis of such financial instruments, including our trade receivables.

Further, we consider macroeconomic

factors and the status of the technology industry to estimate if there are current expected credit losses within our trade receivables

based on the trends and our expectation of the future status of such economic and industry-specific factors.

Also, specific allowance

amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability

Further, we consider macroeconomic factors

and the status of the technology industry to estimate if there are current expected credit losses within our trade receivables based on

the trends and our expectation of the future status of such economic and industry-specific factors.

Also, specific allowance amounts are

established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of

The accounts receivable balance

on our consolidated balance sheet as of March 31, 2023 was $ 1.9 million, net of approximately $ 30,000 of allowances.

on our consolidated balance sheet as of June 30, 2023 was $ 1.3 million, net of approximately $ 30,000 of allowances.

The following table

provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present

the net amount expected to be collected at March 31, 2023:

the net amount expected to be collected at June 30, 2023:

Balance at January 1, 2023

1 unchanged sentence

Write-offs, net of recoveries

Balance at March 31, 2023

Company’s inventory consists primarily of components that will be used in the manufacturing of our touch sensor modules (“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

to the low sell-through of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well

as AirBar related raw materials.

Management has further decided to reserve for a portion of AirBar finished goods, depending on type

of AirBar and in which location it is stored.

The AirBar inventory reserve was $ 0.3 million as of March 31, 2023 and December 31, 2022,

respectively.

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

Balance at June 30, 2023

The Company’s inventory

consists primarily of components that will be used in the manufacturing of our touch sensor modules (“TSMs”).

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.

Due to the low sell-through

of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well as AirBar related raw materials.

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

it is stored.

The AirBar inventory reserve was $ 0.3 million and $ 0.3 million as of June 30, 2023 and December 31, 2022, respectively.

Raw materials, work-in-process,

and finished goods are as follows (in thousands):

Raw materials

Work-in-process

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:

of equipment purchased under a finance lease is depreciated over the term of the lease, if that lease term is shorter than the estimated

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 consolidated statement of operations.

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

Computer equipment

Furniture and fixtures

Depreciation of equipment

purchased under a finance lease is depreciated 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 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.

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.

assess any impairment by estimating the future cash flow from the associated asset in accordance with relevant accounting guidance.

the estimated undiscounted future cash flow 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, 2023, 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

functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen, the South Korean

Won and the Taiwan Dollar.

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.

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 Assets

We assess any impairment by

estimating the future cash flow from the associated asset in accordance with relevant accounting guidance.

If the estimated undiscounted

future cash flow 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 June 30, 2023, 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.

Foreign Currency Translation and Transaction

Gains and Losses

The functional currency of

our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen, the South Korean Won and the Taiwan Dollar.

The translation from Swedish Krona, Japanese Yen, South Korean Won and Taiwan Dollar to U.S.

Dollars is performed

for balance sheet accounts using current exchange rates in effect at the balance sheet date and for income statement accounts using a

weighted-average exchange rate during the period.

Gains or (losses) resulting from translation are included as a separate component of

accumulated other comprehensive income (loss).

Foreign currency translation gains were $ 35,000 and $ 33,000 during the three months ended

March 31, 2023 and 2022, respectively.

Losses resulting from foreign currency transactions are included in general and administrative

expenses in the accompanying condensed consolidated statements of operations and were $( 5,000 ) during the three months ended March 31,

2023 compared to $( 1,000 ) during the same period in 2022.

Concentration

of Credit and Business Risks

customers are located in the United States, Europe and Asia.

As of March 31, 2023, three

Dollars is performed for balance sheet accounts

using current exchange rates in effect at the balance sheet date and for income statement accounts using a weighted-average exchange rate

during the period.

Gains or (losses) resulting from translation are included as a separate component of accumulated other comprehensive

income (loss).

Foreign currency translation gains (losses) were $( 141,000 ) and $( 106,000 ) and $ 41,000 and $ 74,000 during the three and

six months ended June 30, 2023 and 2022, 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 $ 0 and $( 5,000 ) during the three

and six months ended June 30, 2023, respectively, compared to $ 30,000 and $ 29,000 during the same periods in 2022, respectively.

Concentration of Credit and Business Risks

Our customers are located

in the United States, Europe and Asia.

As of June 30, 2023, four

of our customers represented approximately 71 % of our consolidated accounts receivable and unbilled revenues.

of December 31, 2022, five of our customers represented approximately 83 % 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, 2023 are as follows:

As of December 31, 2022, five

of our customers represented approximately 83 % of our consolidated accounts receivable and unbilled revenues.

Customers who accounted for

10 % or more of our net revenues during the three months ended June 30, 2023 are as follows:

● Hewlett-Packard Company – 37 %

● Seiko Epson – 20 %

● Alps Alpine – 15 %

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

● Alpine Electronics, Inc – 15 %

● Seiko Epson Corporation – 14 %

● LG Electronics Inc.

Customers who accounted for

10 % or more of our net revenues during the six months ended June 30, 2023 are as follows:

● Hewlett-Packard Company – 34 %

● Seiko Epson – 17 %

● Alps Alpine – 11 %

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.

● Seiko Epson Corporation – 17 %

● Alpine Electronics, Inc

● LG Electronics Inc.

Customers who accounted for

10 % or more of our net revenues during the three months ended June 30, 2022 are as follows:

● Hewlett-Packard Company – 24 %

● Seiko Epson Corporation – 19 %

● LG Electronics Inc.

Customers who accounted for

10 % or more of our net revenues during the six months ended June 30, 2022 are as follows:

● Hewlett-Packard Company – 28 %

● Seiko Epson Corporation – 18 %

● LG Electronics Inc.

● Alpine Electronics, Inc – 10 %

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 (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.

License 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, 2023.

earn revenue from sales of TSM hardware products to our Original Equipment Manufacturer (“OEM”), Original Design Manufacturer

(“ODM”) 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.

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.

We 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 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 June 30, 2023.

Product Sales

We earn revenue from sales

of TSM hardware products to our Original Equipment Manufacturer (“OEM”), Original Design Manufacturer (“ODM”)

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.

we generally use distributors to provide AirBar and TSMs 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 AirBar and TSMs 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 AirBar and TSM returns and warranty

The 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 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.

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.

GAAP, companies may

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

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

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

$ 9,000 as of each of March 31, 2023 and December 31, 2022.

The warranty reserve is recorded as an accrued expense and cost of sales and

was $ 47,000 as of March 31, 2023 and $ 49,000 as of December 31, 2022.

$ 8,000 as of June 30, 2023 and $ 9,000 as of December 31, 2022.

The warranty reserve is recorded as an accrued expense and cost of sales

and was $ 39,000 as of June 30, 2023 and $ 49,000 as of December 31, 2022.

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

technology license or 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

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.

Non-Recurring Engineering

For technology license or

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 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 unearned revenue 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.

losses on all SOW projects are recognized in full as soon as they become evident.

During the three months ended March 31, 2023 and 2022,

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, 2023 and

2022 (dollars in thousands):

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 unearned revenue until that revenue is earned.

We believe that recognizing

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

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

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

Hours performed for each engineering project are tracked and reflect

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

Revenues from non-recurring

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

Revenues 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 six months ended June 30, 2023 and 2022, no losses

related to SOW projects were recorded.

The following tables present

the net revenues distribution by geographical area and market for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

Three months ended

March 31, 2023

June 30, 2023

Three months ended

March 31, 2022

June 30, 2022

Net revenues from consumer electronics

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Net 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.

following table presents accounts receivable and deferred revenues as of March 31, 2023 and December 31, 2022 (in thousands):

Six months ended June 30, 2023

Six months ended June 30, 2022

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

Significant Judgments

Our 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.

Determining whether products and services

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

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 obligations;

however, we recently negotiated a contract that may include multiple performance obligations

in the future.

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

The following table presents

accounts receivable and deferred revenues as of June 30, 2023 and December 31, 2022 (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;

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;

contract assets are generally classified as current.

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 sheets on a contract-by-contract

basis at the end of each reporting period.

do not anticipate impairment 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 to assess

whether the contract assets have been impaired.

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

the allowance based on known troubled accounts, historical experience, and other currently available evidence.

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

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.

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 sheets on a contract-by-contract basis at the end of each reporting period.

We do not anticipate impairment

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 to assess whether the contract assets

have been impaired.

The allowance for credit losses

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.

Payment 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.

Costs to Obtain Contracts

We record the incremental

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

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):

at beginning of period

for warranty issued

at end of period

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 included as a component of accrued expenses

on the condensed consolidated balance sheet.

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):

Balance at beginning of period

Provisions for warranty issued

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 included as a component of accrued expenses on the condensed consolidated

balance sheet.

Contract Liabilities

liabilities (deferred revenues) consist primarily of prepayments for license fees, and other products or services that we have been paid

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):

revenues license fees

revenues products

revenues non-recurring engineering

During the three months ended

March 31, 2023, the Company recognized revenues of approximately $ 5,000 related to contract liabilities outstanding at the beginning of

Contract liabilities (deferred

revenues) consist primarily of prepayments for license fees, and other products or services that we have been paid in advance.

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.

Non-recurring engineering fee revenues are deferred until engineering services have been completed and

accepted by our customers.

The following table presents

our deferred revenues by source (in thousands):

Deferred revenues license fees

Deferred revenues products

Deferred revenues non-recurring engineering

During the three and six months

ended June 30, 2023, the Company recognized revenues of approximately $ 9,000 and 14,000 , respectively, related to contract liabilities

outstanding at the beginning of the year.

Advertising costs are expensed

Advertising costs for the three and six months ended June 30, 2023 and 2022 amounted to approximately $ 58,000 and $ 112,000

and $ 38,000 and $ 84,000 , respectively.

Research and Development

Research and development (“R&D”)

costs are expensed as incurred.

Advertising costs for the three months ended March 31, 2023 and 2022 amounted to approximately $ 54,000

and $ 46,000 , 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

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 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.

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 condensed consolidated statements of operations.

interest, also known as a minority interest, as a separate line item in stockholders’ equity in the condensed consolidated financial

A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable

Generally, any interest that holds less than 50 % of the outstanding voting shares is deemed to be a noncontrolling interest;

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 condensed consolidated statements of operations.

The Company provides either

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

income or loss;

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

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.

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 the consolidated financial statements

or tax returns.

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

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

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

The realization

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

Valuation allowances are recorded

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

of the accounting guidance.

on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of March 31, 2023 and December 31, 2022.

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.

Deferred income tax

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

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

The realization of deferred tax assets

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

Valuation allowances are recorded against net deferred

tax assets when, in our opinion, realization is uncertain based on the “more likely than not” criteria of the accounting guidance.

Based on the uncertainty of

future pre-tax income, we fully reserved our net deferred tax assets as of June 30, 2023 and December 31, 2022.

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.

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

As of March 31,

2023 and December 31, 2022, we had no unrecognized tax benefits.

Loss per Share

loss per share amounts have been computed based on the weighted average number of shares of common stock outstanding during the three

months ended March 31, 2023 and 2022.

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, 2023 and 2022 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 8).

Comprehensive Income (Loss)

As of June 30, 2023 and December

31, 2022, we had no unrecognized tax benefits.

Net 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 six months ended June

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 six months ended June

30, 2023 and 2022 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 8).

Other Comprehensive Income (Loss)

Our other comprehensive income

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balance sheets.

Flow Information

Cash Flow Information

Cash flows in foreign currencies

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exchange rates for the condensed consolidated statements of operations were as follows:

Six months ended

Swedish Krona

South Korean Won

Taiwan Dollar

The exchange rates for the

condensed consolidated balance sheets were as follows:

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.

Swedish Krona

South Korean Won

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 and

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

Recent Accounting Pronouncements

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and other financial assets, including current market conditions and historical credit loss activity, the adoption of this standard did

not have a material impact on our consolidated financial statements or disclosures.

Specifically, our estimate of expected credit losses

as of March 31, 2023, using our expected credit loss evaluation process described above, resulted in no adjustments to the provision for

credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

not have a material impact on our condensed consolidated financial statements or disclosures.

Specifically, our estimate of expected credit

losses as of June 30, 2023, using our expected credit loss evaluation process described above, resulted in no adjustments to the provision

for credit losses and no cumulative-effect adjustment to accumulated deficit on the adoption date of the standard.

Stockholders’ Equity

At-the-Market

At-the-Market Facility

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

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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.

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.

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

of March 31, 2023 and December 31, 2022, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 25,000,000

shares of common stock, par value $ 0.001 per share.

May 20, 2022, we issued 4,000 shares of our common stock to a director pursuant to the Neonode Inc.

2020 Stock Incentive Plan (the “2020

Plan”) (see Note 4).

September 15, 2022, we repurchased 10,252 shares of common stock from an employee who resigned during the two-year lock up period associated

with such shares for $ 12,000 , pursuant to the terms of the 2020 LTIP.

the year ended December 31, 2022, we sold an aggregate of 886,065 shares of common stock under the ATM Facility, resulting in

net proceeds of approximately $ 4,686,000 after payment of commissions to B.

As of June 30, 2023 and December

31, 2022, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 25,000,000 shares of common stock, par value

$ 0.001 per share.

On May 20, 2022, we issued

4,000 shares of our common stock to a director pursuant to the Neonode Inc.

2020 Stock Incentive Plan (the “2020 Plan”) (see

On September 15, 2022, we repurchased

10,252 shares of common stock from an employee who resigned during the two-year lock up period associated with such shares for $ 12,000 ,

pursuant to the terms of the 2020 Long-Term Incentive Program (“2020 LTIP”).

During the year ended December

31, 2022, we sold an aggregate of 886,065 shares of common stock under the ATM Facility, resulting in net proceeds of approximately $ 4,686,000

after payment of commissions to B.

Riley Securities and other expenses of $ 167,000 .

During the three months ended

March 31, 2023, we sold an aggregate of 903,716 shares of our common stock under the ATM Facility with aggregate net proceeds to us of

During the six months ended

June 30, 2023, we sold an aggregate of 903,716 shares of our common stock under the ATM Facility with aggregate net proceeds of $ 7,866,000 ,

after payment of commissions to B.

Riley Securities and other expenses of $ 244,000 .

of March 31, 2023 and December 31, 2022, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 1,000,000

shares of preferred stock, par value $ 0.001 per share.

were no transactions in our preferred stock during the three months ended March 31, 2023 and 2022.

No shares of preferred stock were

issued and outstanding as of March 31, 2023 and December 31, 2022.

As of March 31, 2023 and December

Preferred Stock

As of June 30, 2023 and December

31, 2022, our Restated Certificate of Incorporation, as amended, authorized us to issue up to 1,000,000 shares of preferred stock, par

value $ 0.001 per share.

There were no transactions

in our preferred stock during the three and six months ended June 30, 2023 and 2022.

No shares of preferred stock were issued and outstanding

as of June 30, 2023 and December 31, 2022.

As of June 30, 2023 and December

31, 2022, the Company had no outstanding warrants to purchase common stock.

Stock-Based Compensation

have adopted equity incentive plans for which stock options and restricted stock awards are available for grants to employees, consultants

and directors.

Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted

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

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.

Options and Long-Term Incentive Plan

the year ended December 31, 2020, our stockholders approved the 2020 Plan which replaced our 2015 Stock Incentive Plan (the “2015

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

We have adopted equity incentive

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

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 and Long-Term Incentive Plan

During the year ended December

31, 2020, our stockholders approved the 2020 Plan which replaced our 2015 Stock Incentive Plan (the “2015 Plan”), which in

turn replaced our Neonode Inc.

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

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 such plan.

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 consultants.

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

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 such plan.

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 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

2020 long-term incentive program (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.

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.

May 20, 2022, we issued 4,000 shares of common stock to a director pursuant to the 2020 Plan.

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 $ 5,000 for the issued shares

but only 30 % of the stock-based compensation (totaling $ 5,000 ) was recognized immediately in the consolidated statements of operations

for the year ended December 31, 2022, with the remainder to be recognized ratably over the two-year lock-up period.

On September 15, 2022, we repurchased

10,252 shares of common stock from an employee who resigned during the two-year lock up period associated with such shares for $ 12,000 ,

pursuant to the terms of the 2020 LTIP.

the three months ended March 31, 2023 and 2022, we recognized $ 18,000 and $ 39,000 , 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:

at January 1, 2023

at March 31, 2023

aggregate intrinsic value of the 2,500 stock options that are outstanding, vested and expected to vest as of March 31, 2023 was $ 0 .

the three months ended March 31, 2023 and 2022, we recorded no compensation expense related to the vesting of stock options.

the three months ended March 31, 2023, we did not grant any options to purchase shares of our common stock to employees or members of

our board of directors.

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.

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.

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 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

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.

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 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.

On 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

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.

On May 20, 2022, we issued

4,000 shares of common stock to a director pursuant to the 2020 Plan.

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

The Company has reported and paid Swedish social charges of $ 5,000 for the issued shares but only 30 % of the stock-based compensation

(totaling $ 5,000 ) was recognized immediately in the consolidated statements of operations for the year ended December 31, 2022, with the

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

On September 15, 2022, we

repurchased 10,252 shares of common stock from an employee who resigned during the two-year lock up period associated with such shares

for $ 12,000 , pursuant to the terms of the 2020 LTIP.

For the three and six

months ended June 30, 2023 and 2022, we recognized $ 17,000 and $ 35,000 and $ 45,000 and $ 84,000 , respectively, of stock-based

compensation for the amortization of the fair value of stock awards issued under the 2020 LTIP and 2020 Plan over the respective

lock-up periods.

A summary of the combined

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

Outstanding at January 1, 2023

Outstanding at June 30, 2023

The aggregate intrinsic value

of the 2,500 stock options that are outstanding, vested and expected to vest as of June 30, 2023 was $ 0 .

For the three and six months

ended June 30, 2023 and 2022, we recorded no compensation expense related to the vesting of stock options.

During the three and six months

ended June 30, 2023, 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

and Guarantees

bylaws require that we indemnify each of our executive officers and directors for certain events or occurrences arising because of the

officer or director serving in such capacity.

Indemnities and Guarantees

Our bylaws require that we

indemnify each of our executive officers and directors for certain events or occurrences arising because of the officer or director serving

in such capacity.

The term of the indemnification period is for the officer’s or director’s lifetime.

The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited.

we have a directors’ and officers’ liability insurance policy that should enable us to recover a portion of any future amounts

As a result of our 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 March 31, 2023 and December 31, 2022.

enter into indemnification provisions under our agreements with other companies in the ordinary course of business, typically with business

partners, contractors, customers and landlords.

Under these provisions we generally indemnify and hold harmless the indemnified party

for losses suffered or incurred by the indemnified party as a result of our activities or, in some cases, as a result of the indemnified

party’s activities under the agreement.

These indemnification provisions often include indemnifications relating to representations

made by us regarding intellectual property rights.

The maximum potential

amount of future payments we could be required to make under these indemnification agreements is unlimited.

However, we have a directors’

and officers’ liability insurance policy that should enable us to recover a portion of any future amounts paid.

As a result of our

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 June 30, 2023 and December 31, 2022.

We enter into indemnification

provisions under our agreements with other companies in the ordinary course of business, typically with business partners, contractors,

customers and landlords.

Under these provisions we generally indemnify and hold harmless the indemnified party for losses suffered or

incurred by the indemnified party as a result of our activities or, in some cases, as a result of the indemnified party’s activities

under the agreement.

These indemnification provisions often include indemnifications relating to representations made by us regarding

intellectual property rights.

These indemnification provisions generally survive termination of the underlying agreement.

The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited.

have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements.

As a result, we believe

the estimated fair value of these agreements is minimal.

Accordingly, we have no liabilities recorded for these indemnification provisions

as of March 31, 2023 and December 31, 2022.

potential amount of future payments we could be required to make under these indemnification provisions is unlimited.

We have not incurred

material costs to defend lawsuits or settle claims related to these indemnification agreements.

As a result, we believe the estimated

fair value of these agreements is minimal.

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

30, 2023 and December 31, 2022.

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 the potential net

proceeds generated from a licensing and monetization program.

Under the terms of the assignment, net proceeds means gross proceeds less

out of pocket expenses and legal fees.

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 two patents.

assigned a portfolio of patents to Aequitas Technologies LLC ("Aequitas"), an unrelated third party.

The assignment provides

the Company the right to share the potential net proceeds to Aequitas generated from possible licensing and monetization program that

Aequitas may enter into.

Under the terms of the assignment, net proceeds means gross proceeds less out of pocket expenses and legal fees

paid by Aequitas.

The Company’s share would also be net of the Company’s own fees and expenses, including a brokerage fee

payable by the Company in connection with the original assignment to Aequitas.

On June 8, 2020, Neonode Smartphone LLC, an unrelated third party that

is a subsidiary of Aequitas (“Aequitas Sub"), filed complaints against Apple and Samsung in the Western District of Texas for

infringing two patents.

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

Application Specific Integrated Circuit (“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 2,000,000 ASICs sold.

As of March 31, 2023, we had

made no payments to TI under the NN1002 Agreement.

In December 2022,

the Patent Trial and Appeal Board invalidated one of the two patents, which Aequitas Sub is appealing.

On August 2, 2023, the United States

District Court for the Western District of Texas entered judgment in favor of Samsung.

The case against Apple is 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 Application Specific Integrated

Circuit (“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 2,000,000 ASICs sold.

As of June 30, 2023, we had made no payments to TI under the

NN1002 Agreement.

Segment Information

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.

following table presents net revenues by geographic area for the three months ended March 31, 2023 and 2022, respectively (dollars in

We 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 six months ended June 30, 2023 and 2022, respectively (dollars in thousands):

Three months ended

March 31, 2023

June 30, 2023

Three months ended

March 31, 2022

June 30, 2022

United States

following table presents our total assets by geographic region as of March 31, 2023 and December 31, 2022 (in thousands):

Six months ended

June 30, 2023

Six months ended

June 30, 2022

United States

The following table presents

our total assets by geographic region as of June 30, 2023 and December 31, 2022 (in thousands):

United States

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 extend.

our manufacturing facility, and finance leases for equipment.

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

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.

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

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.

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.

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 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.

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.

Our finance leases represent manufacturing equipment;

the manufacturing equipment, as well as current and noncurrent finance lease obligations on our condensed 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):

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):

Three months ended

Six months ended

Operating lease cost (1)

3 unchanged sentences

Total finance lease cost

(1) Includes short-term lease costs of $ 108,000 and $ 44,000 for the three months ended March 31, 2023 and 2022, respectively.

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

short-term lease costs of $ 110,000 and $ 218,000 and $ 37,000 and $ 81,000 for the three and six months ended June 30, 2023 and 2022, respectively.

Supplemental cash flow information

related to leases was as follows (in thousands):

Three months ended

Six months ended

Cash paid for amounts included in leases:

4 unchanged sentences

Operating leases

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

Supplemental balance sheet

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

Operating leases

16 unchanged sentences

Finance leases

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

summary of future minimum payments under non-cancellable operating lease commitments as of March 31, 2023 is as follows (in thousands):

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 June 30, 2023 is as follows (in thousands):

Year ending December 31,

3 unchanged sentences

Less current portion

following is a schedule of minimum future rentals on the non-cancellable finance leases as of March 31, 2023 (in thousands):

The following is a schedule

of minimum future rentals on the non-cancellable finance leases as of June 30, 2023 (in thousands):

Year ending December 31,

5 unchanged sentences

Net Loss per Share

net loss per common share for the three months ended March 31, 2023 and 2022 was computed by dividing the net loss attributable to common

shareholders of Neonode Inc.

Basic net loss per common

share for the three and six months ended June 30, 2023 and 2022 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, 2023 and 2022, respectively.

Diluted loss per common

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

for the relevant period by the weighted average

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

There were no potentially

dilutive common stock equivalents for the three and six months ended June 30, 2023 and 2022, respectively.

Three months ended

Six months ended

(in thousands, except per share amounts)

average number of common shares outstanding

loss attributable to Neonode Inc.

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

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.

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.

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