Neonode Inc. 10-Q

Item 1. Financial Statements NEONODE INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share and per share amounts) March 31, December 31, 2025 2024 ASSETS Current assets: Cash and cash equivalents $ 14,991 $ 16,427 Accounts receivable and unbilled revenues, net 671 732 Contract assets 66 51 Prepaid expenses and other current assets 481 475 Current assets of discontinued operations 52 - Total current assets 16,261 17,685 Non-current assets: Property and equipment, net 101 62 Operating lease right-of-use assets, net 610 634 Total non-current assets 711 696 Total assets $ 16,972 $ 18,381 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 400 $ 229 Accrued payroll and employee benefits 940 760 Accrued expenses 439 404 Contract liabilities 75 - Current portion of finance lease obligations 9 2 Current portion of operating lease obligations 258 225 Total current liabilities 2,121 1,620 Non-current liabilities Finance lease obligations, net of current portion 20 - Operating lease obligations, net of current portion 256 319 Total non-current liabilities 276 319 Total liabilities 2,397 1,939 Commitments and contingencies (Note 4) Stockholders’ equity: Preferred stock, 1,000,000 shares authorized, with par value of $ 0.001 ; no shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. - - Common stock, 25,000,000 shares authorized, with par value of $ 0.001 ; 16,782,922 and 16,782,922 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively. 17 17 Additional paid-in capital 240,955 240,955 Accumulated other comprehensive loss ( 584 ) ( 450 ) Accumulated deficit ( 225,813 ) ( 224,080 ) Total stockholders’ equity 14,575 16,442 Total liabilities and stockholders’ equity $ 16,972 $ 18,381 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 NEONODE INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Three months ended March 31, 2025 2024 Revenues: License fees $ 497 $ 773 Non-recurring engineering 16 41 Total revenues 513 814 Cost of revenues: Non-recurring engineering 9 17 Total cost of revenues 9 17 Gross margin 504 797 Operating expenses: Research and development 975 895 Sales and marketing 642 816 General and administrative 852 972 Total operating expenses 2,469 2,683 Operating loss ( 1,965 ) ( 1,886 ) Other income, net 155 180 Loss before provision for income taxes ( 1,810 ) ( 1,706 ) Provision for income taxes ( 10 ) 10 Loss from continuing operations ( 1,800 ) ( 1,716 ) Income (loss) from discontinued operations 67 ( 368 ) Net loss $ ( 1,733 ) $ ( 2,084 ) Loss per common share: Basic and diluted loss per share from continuing operations $ ( 0.11 ) $ ( 0.11 ) Basic and diluted loss per share from discontinued operations - ( 0.03 ) Basic and diluted net loss per share (a) $ ( 0.10 ) $ ( 0.14 ) Basic and diluted – weighted average number of common shares outstanding 16,783 15,359 (a) Doesn’t sum due to rounding. The accompanying notes are an integral part of these condensed consolidated financial statements. 2 NEONODE INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) (In thousands) Three months ended March 31, 2025 2024 Net loss $ ( 1,733 ) $ ( 2,084 ) Other comprehensive loss: Foreign currency translation adjustments ( 134 ) ( 34 ) Other comprehensive loss ( 134 ) ( 34 ) Comprehensive loss $ ( 1,867 ) $ ( 2,118 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 3 NEONODE INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) (In thousands) For the three months ended March 31, 2025 and 2024 Common Stock Shares Issued Common Stock Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balances, December 31, 2024 16,783 $ 17 $ 240,955 $ ( 450 ) $ ( 224,080 ) $ 16,442 Foreign currency translation adjustment - - - ( 134 ) - ( 134 ) Net loss - - - - ( 1,733 ) ( 1,733 ) Balances, March 31, 2025 16,783 $ 17 $ 240,955 $ ( 584 ) $ ( 225,813 ) $ 14,575 Common Stock Shares Issued Common Stock Amount Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balances, December 31, 2023 15,359 $ 15 $ 235,158 $ ( 396 ) $ ( 217,614 ) $ 17,163 Stock-based compensation - - 2 - - 2 Foreign currency translation adjustment - - - ( 34 ) - ( 34 ) Net loss - - - - ( 2,084 ) ( 2,084 ) Balances, March 31, 2024 15,359 $ 15 $ 235,160 $ ( 430 ) $ ( 219,698 ) $ 15,047 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 NEONODE INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Three months ended March 31, 2025 2024 Cash flows from operating activities: Net loss $ ( 1,733 ) $ ( 2,084 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense - 2 Depreciation and amortization 9 27 Amortization of operating lease right-of-use assets 82 17 Inventory impairment loss - 278 Changes in operating assets and liabilities: Accounts receivable and unbilled revenues, net ( 5 ) ( 170 ) Inventory - ( 253 ) Prepaid expenses and other current assets 28 136 Accounts payable, accrued payroll and employee benefits, and accrued expenses 262 76 Contract liabilities 75 73 Operating lease obligations ( 78 ) ( 17 ) Net cash used in operating activities ( 1,360 ) ( 1,915 ) Cash flows from investing activities: Purchase of property and equipment ( 40 ) - Net cash used in investing activities ( 40 ) - Cash flows from financing activities: Principal payments on finance lease obligations ( 2 ) ( 9 ) Net cash used in financing activities ( 2 ) ( 9 ) Effect of exchange rate changes on cash and cash equivalents ( 34 ) 43 Net change in cash and cash equivalents ( 1,436 ) ( 1,881 ) Cash and cash equivalents at beginning of period 16,427 16,155 Cash and cash equivalents at end of period $ 14,991 $ 14,274 Supplemental disclosure of cash flow information: Cash paid for income taxes $ 10 $ 10 Cash paid for interest $ - $ 1 Supplemental disclosure of non-cash investing and financial activities: Property and equipment obtained in exchange for finance lease obligations $ 28 $ - The accompanying notes are an integral part of these condensed consolidated financial statements. 5 NEONODE INC. Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Summary of Significant Accounting Policies Basis of Presentation and Preparation The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Neonode Inc. and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by us, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally contained in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. Recently Issued Accounting Pronouncement Adopted In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. The ASU also clarifies that entities with a single reportable segment are subject to both new and existing reporting requirements under Topic 280. We adopted ASU 2023-07 for this interim period ended March 31, 2025 using a retrospective method to all periods presented. See Note 6 Segment Information for further details. Recently Issued Accounting Pronouncements Pending Adoption In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which updates several disclosures regarding the accounting for income taxes. ASU 2023-09 will become effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact ASU 2023-09 will have on our consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2024-03. Foreign Currency Translation and Transaction Gains and Losses The functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen, 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 condensed consolidated 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 losses were $( 134,000 ) and $( 34,000 ) during the three months ended March 31, 2025 and 2024, respectively. Gains resulting from foreign currency transactions are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and were $ 80,000 and $ 5,000 during the three months ended March 31, 2025 and 2024, respectively. Liquidity We have incurred significant operating losses and negative cash flows from operations since our inception. The Company incurred net losses for combined continuing and discontinued operations of approximately $ 1.7 million and $ 2.1 million for the three months ended March 31, 2025 and 2024, respectively and had an accumulated deficit of approximately $ 225.8 million and $ 224.1 million as of March 31, 2025 and December 31, 2024, respectively. In addition, operating activities used cash of approximately $ 1.4 million and $ 1.9 million for the three months ended March 31, 2025 and 2024, 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. 6 Management has prepared an operating plan and believes that the Company has sufficient cash to meet its obligations as they come due for a year from the date the condensed consolidated financial statements were issued. Concentration of Credit and Business Risks Our customers are located in the United States, Europe and Asia. As of March 31, 2025, four of our customers represented approximately 94.0 % of our consolidated accounts receivable and unbilled revenues. As of December 31, 2024, four of our customers represented approximately 80.9 % of our consolidated accounts receivable and unbilled revenues. Customers who accounted for 10.0% or more of our net revenues during the three months ended March 31, 2025 are as follows: ● Seiko Epson – 39.02 % ● Alps Alpine – 27.8 % ● Hewlett-Packard Company – 19.6 % Customers who accounted for 10.0% or more of our net revenues during the three months ended March 31, 2024 are as follows: ● Hewlett-Packard Company – 30.9 % ● Alps Alpine – 22.9 % ● Seiko Epson – 19.6 % Revenues The following tables present the net revenues distribution by geographical area and market: Three months ended March 31, 2025 2024 (in thousands) Amount Percentage Amount Percentage North America Net revenues from Automotive $ - - % $ - - % Net revenues from IT & Industrial 113 100.0 % 271 100.0 % $ 113 100.0 % $ 271 100.0 % Asia Pacific Net revenues from Automotive $ 143 40.1 % $ 248 54.6 % Net revenues from IT & Industrial 214 59.9 % 206 45.4 % $ 357 100.0 % $ 454 100.0 % Europe, Middle East and Africa Net revenues from Automotive $ 43 100.0 % $ 89 100.0 % Net revenues from IT & Industrial - - % - - % $ 43 100.0 % $ 89 100.0 % 7 Contract Liabilities The following table presents our deferred revenues by source: (in thousands) March 31, 2025 December 31, 2024 Deferred revenues license fees $ 75 $ - $ 75 $ - During the three months ended March 31, 2025 and 2024, the Company recognized revenues of approximately zero and $ 27,000 respectively, related to contract liabilities outstanding at the beginning of the period. Income Taxes We recognize deferred tax liabilities and assets for the expected future tax consequences of items that have been included in the condensed consolidated financial statements or tax returns. We estimate income taxes based on rates in effect in each of the jurisdictions in which we operate. Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and expectations about future taxable income. Valuation allowances are recorded against net deferred tax assets when, in our opinion, realization is uncertain based on the “more likely than not” criteria of the accounting guidance. Based on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of March 31, 2025 and December 31, 2024. In the event we were to determine that we would be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase income in the period such determination was made. The provision for income taxes represents the net change in deferred tax amounts, plus income taxes paid or payable for the current period. We follow U.S. GAAP related 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, 2025 and December 31, 2024, we had no unrecognized tax benefits. 2. Discontinued Operations During the fourth quarter of 2023 the Company decided to phase out the product business and as a consequence terminate production at the Pronode Technologies AB facilities in Kungsbacka, Sweden. Subsequently, we commenced the phase out of our TSM product business during the first quarter of 2024 through licensing of the TSM technology to strategic partners or outsourcing. In May 2024, we stopped producing TSMs and started to shut down the factory. The facility lease terminated as of September 30, 2024 and was not renewed. The Company concluded that the termination of TSM manufacturing met the criteria for discontinued operations. As a result, this business has been reclassified to discontinued operations in these consolidated financial statements for all periods presented. Assets and Liabilities of Discontinued Operations Assets and liabilities of discontinued operations are presented separately in the condensed consolidated balance sheets for all periods presented. On March 31, 2025 and December 31, 2024, these balances consisted of assets and liabilities of the Company’s Products business. 8 The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the assets and liabilities of discontinued operations as presented on the Company’s condensed consolidated balance sheets: March 31, December 31, (in thousands) 2025 2024 ASSETS OF DISCONTINUED OPERATIONS Current assets: Accounts receivable and unbilled revenues, net $ 52 $ - Total current assets of discontinued operations 52 - Total assets of discontinued operations $ 52 $ - Income (Loss) from Discontinued Operations Discontinued operations for the three months ended March 31, 2025 and 2024, respectively, consists of results from the Company’s products business. The following table provides details about the major classes of line items constituting “Income (loss) from discontinued operations” as presented on the Company’s condensed consolidated statements of operations: Three months ended March 31, (in thousands) 2025 2024 Revenues: Products $ 67 $ 200 Total revenues 67 200 Cost of revenues: Products - 380 Total cost of revenues - 380 Gross (loss) margin 67 ( 180 ) Operating expenses: General and administrative - 188 Total operating expenses - 188 Operating income (loss) 67 ( 368 ) Income (loss) from discontinued operations $ 67 $ ( 368 ) Cash Flows Information The following table presents cash flow information for discontinued operations: Three months ended March 31, (in thousands) 2025 2024 Depreciation and amortization $ - $ 15 Amortization of operating lease ROU assets - 17 Inventory impairment loss - 278 9 3. Stockholders’ Equity At-the-Market Facility On May 10, 2021, we entered into an At Market Issuance Sales Agreement (the “B. Riley Sales Agreement”) with B. Riley Securities, Inc. (“B. Riley Securities”) with respect to an “at the market” offering program (the “B. Riley ATM Facility”), under which we may, from time to time, in our sole discretion, issue and sell through B. Riley Securities, acting as sales agent, up to $ 25 million of shares of our common stock, in any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended. On May 29, 2024, we terminated the B. Riley Sales Agreement with B. Riley Securities. On June 4, 2024, we entered into an At The Market Offering Agreement (the “Ladenburg Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”) with respect to an “at the market” offering program (the “Ladenburg ATM Facility”), under which we may, from time to time, in our sole discretion, issue and sell through Ladenburg, acting as agent or principal, up to approximately $ 10 million of shares of our common stock. Pursuant to the Ladenburg Sales Agreement, we may sell the shares through Ladenburg by any method permitted that is deemed an “at the market” offering as defined in Rule 415 under the Securities Act of 1933, as amended. Ladenburg will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from us (including any price or size limits or other customary parameters or conditions we may impose). We will pay Ladenburg a commission of 3.0 % of the gross sales price per share sold under the Ladenburg Sales Agreement. We are not obligated to sell any shares under the Ladenburg Sales Agreement. The offering of shares pursuant to the Ladenburg Sales Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through Ladenburg, of all of the shares of our common stock subject to the Ladenburg Sales Agreement and (ii) termination of the Ladenburg Sales Agreement in accordance with its terms. 4. Commitments and Contingencies Legal The Company is subject to legal proceedings and claims that may arise in the ordinary course of business. The Company is not aware of any pending or threatened litigation matters at this time that would have a material impact on the operations of the Company. 5. Net Loss per Share Basic net loss per common share for the three months ended March 31, 2025 and 2024 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. 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 excluding potential common stock equivalents that are anti-dilutive. The Company had no potential common stock equivalents for the three months ended March 31, 2025 and 2024, respectively. Three months ended March 31, (in thousands, except per share amounts) 2025 2024 BASIC AND DILUTED Weighted average number of common shares outstanding 16,783 15,359 Loss from continuing operations $ ( 1,800 ) $ ( 1,716 ) Income (loss) from discontinued operations 67 ( 368 ) Net loss $ ( 1,733 ) $ ( 2,084 ) Loss per share from continuing operations - basic and diluted $ ( 0.11 ) $ ( 0.11 ) Loss per share from discontinued operations - basic and diluted - ( 0.03 ) Net loss per share - basic and diluted (a) $ ( 0.10 ) $ ( 0.14 ) (a) Doesn’t sum due to rounding. 10 6. Segment Information The Company operates as one operating segment. Our chief operating decision maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating loss and net loss to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of revenues, research and development, sales and marketing, and general and administrative expenses. The following table presents key financial information with respect to the Company’s single operating segment: Three months ended March 31, (in thousands) 2025 2024 Revenues $ 513 $ 814 Costs and expenses (a) Cost of revenues 9 17 Product R&D 41 39 General and administrative, including rent 196 364 Payroll and related 1,703 1,722 Professional fees and IP 369 327 Marketing and travel 160 235 Total costs and expenses 2,478 2,704 Other segment items (b) - 3 Other income, net 155 181 Loss before provision for income taxes ( 1,810 ) ( 1,706 ) Provision for income taxes ( 10 ) 10 Loss from continuing operations $ ( 1,800 ) $ ( 1,716 ) (a) The significant expense categories and amounts align with the segment-level information that is regularly provided to the chief operating decision-maker. (b) Other segment items primarily include depreciation and amortization, payroll and related - re-allocated to cost of revenues, and stock options expense. The following table presents the long-lived assets property and equipment and right-of-use assets by geographic area: March 31, December 31, 2025 2024 Sweden $ 711 $ 696 Total $ 711 $ 696 We report revenues from external customers based on the country where the customer is located. The following table presents net revenues by country : Three months ended March 31, 2025 2024 (in thousands) Amount Percentage Amount Percentage Japan $ 350 68.3 % $ 386 47.4 % Sweden 33 6.4 % 25 3.1 % Germany 10 1.9 % 64 7.9 % China 6 1.2 % 6 0.7 % South Korea - - % 62 7.6 % Other 1 0.2 % - - % $ 400 78.0 % $ 543 66.7 % United States 113 22.0 % 271 33.3 % $ 513 100.0 % $ 814 100.0 % 7. Subsequent Events 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. 11