Neonode Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to the Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 173 ) F-2 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-3 Consolidated Statements of Operations for the years ended December 31, 2025 and 2024 F-4 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2025 and 2024 F-5 Consolidated Statements of Stockholders ’ Equity for the years ended December 31, 2025 and 2024 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-7 Notes to the Consolidated Financial Statements F-8 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of Neonode Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Neonode Inc. (the "Company") as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Crowe LLP We have served as the Company’s auditor since 2024. New York, New York March 18, 2026 F-2 Table of Contents NEONODE INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) December 31, 2025 December 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 25,358 $ 16,427 Accounts receivable and unbilled revenues, net 391 732 Contract asset - 51 Prepaid expenses and other current assets 495 475 Current assets of discontinued operations 41 - Total current assets 26,285 17,685 Non-current assets: Property and equipment, net 145 62 Operating lease right-of-use assets, net 455 634 Total non-current assets 600 696 Total assets $ 26,885 $ 18,381 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 464 $ 229 Accrued payroll and employee benefits 865 760 Accrued expenses 459 404 Contract liabilities 37 - Current portion of finance lease obligations 12 2 Current portion of operating lease obligations 344 225 Total current liabilities 2,181 1,620 Non-current liabilities: Finance lease obligations, net of current portion 15 - Operating lease obligations, net of current portion - 319 Total non-current liabilities 15 319 Total liabilities 2,196 1,939 Commitments and contingencies (Note 8) Stockholders’ equity: Preferred stock, 1,000,000 shares authorized, with par value of $ 0.001 ; no shares issued and outstanding at December 31, 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 December 31, 2025 and December 31, 2024, respectively. 17 17 Additional paid-in capital 240,955 240,955 Accumulated other comprehensive loss ( 696 ) ( 450 ) Accumulated deficit ( 215,587 ) ( 224,080 ) Total stockholders’ equity 24,689 16,442 Total liabilities and stockholders’ equity $ 26,885 $ 18,381 The accompanying notes are an integral part of these consolidated financial statements. . F-3 Table of Contents NEONODE INC. CONSOLIDATED STATEMENTS OF OPERATIONS ( In thousands, except per share amounts ) Years ended December 31, 2025 2024 Revenues: License fees $ 1,822 $ 2,687 Non-recurring engineering 240 421 Total revenues 2,062 3,108 Cost of revenues: Non-recurring engineering 26 116 Total cost of revenues 26 116 Gross margin 2,036 2,992 Operating expenses: Research and development 3,779 3,444 Sales and marketing 2,274 2,328 General and administrative 4,123 3,767 Total operating expenses 10,176 9,539 Gain from patent assignment 19,389 - Broker fee from patent assignment ( 3,878 ) - Operating income (loss) 7,371 ( 6,547 ) Other income, net 657 687 Income (loss) before provision (benefit) for income taxes 8,028 ( 5,860 ) Provision (benefit) for income taxes ( 9 ) 15 Income (loss) from continuing operations 8,037 ( 5,875 ) Income (loss) from discontinued operations 456 ( 591 ) Net income (loss) $ 8,493 $ ( 6,466 ) Income (loss) per common share: Basic and diluted income (loss) per share from continuing operations $ 0.48 $ ( 0.37 ) Basic and diluted income (loss) per share from discontinued operations 0.03 ( 0.04 ) Basic and diluted net income (loss) per share $ 0.51 $ ( 0.41 ) Basic and diluted – weighted average number of common shares outstanding 16,783 15,873 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents NEONODE INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) ( In thousands ) Years ended December 31, 2025 2024 Net income (loss) $ 8,493 $ ( 6,466 ) Other comprehensive loss: Foreign currency translation adjustments ( 246 ) ( 54 ) Total other comprehensive loss ( 246 ) ( 54 ) Comprehensive income (loss) $ 8,247 $ ( 6,520 ) The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents NEONODE INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY ( In thousands ) Common Stock Shares Issued Common Stock Amount Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders' Equity Balances, January 1, 2024 15,359 $ 15 $ 235,158 $ ( 396 ) $ ( 217,614 ) $ 17,163 Issuance of shares for cash, net of offering costs 1,424 2 5,794 - - 5,796 Stock-based compensation - - 3 - - 3 Foreign currency translation adjustment - - - ( 54 ) - ( 54 ) Net loss - - - - ( 6,466 ) ( 6,466 ) Balances, December 31, 2024 16,783 $ 17 $ 240,955 $ ( 450 ) $ ( 224,080 ) $ 16,442 Foreign currency translation adjustment - - - ( 246 ) - ( 246 ) Net income - - - - 8,493 8,493 Balances, December 31, 2025 16,783 $ 17 $ 240,955 $ ( 696 ) $ ( 215,587 ) $ 24,689 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents NEONODE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS ( In thousands ) Years ended December 31, 2025 2024 Cash flows from operating activities: Net income (loss) $ 8,493 $ ( 6,466 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense - 3 Bad debt expense - 172 Recoveries of bad debt ( 140 ) - Gain from patent assignment ( 19,389 ) - Loss on disposal of assets 2 18 Depreciation and amortization 50 58 Amortization of operating lease right-of-use assets 286 79 Inventory impairment loss - 357 Changes in operating assets and liabilities: Accounts receivable and unbilled revenues 494 ( 51 ) Inventory - 223 Prepaid expenses and other current assets 44 382 Accounts payable, accrued payroll and employee benefits, and accrued expenses 157 ( 213 ) Contract liabilities 37 ( 10 ) Operating lease obligations ( 288 ) ( 144 ) Net cash used in operating activities ( 10,254 ) ( 5,592 ) Cash flows from investing activities: Purchase of property and equipment ( 91 ) ( 37 ) Proceeds from patent assignment 19,389 - Proceeds from sale of property and equipment - 189 Net cash provided by investing activities 19,298 152 Cash flows from financing activities: Proceeds from issuance of common stock, net of offering costs - 5,796 Principal payments on finance lease obligations ( 11 ) ( 17 ) Net cash provided by (used in) financing activities ( 11 ) 5,779 Effect of exchange rate changes on cash and cash equivalents ( 102 ) ( 67 ) Net change in cash and cash equivalents 8,931 272 Cash and cash equivalents at beginning of period 16,427 16,155 Cash and cash equivalents at end of period $ 25,358 $ 16,427 Supplemental disclosure of cash flow information: Cash paid for interest $ - $ 1 Cash paid (received) for income taxes $ ( 9 ) $ 15 Supplemental disclosure of non-cash activities: Property and equipment obtained in exchange for finance lease obligations $ 35 $ - Right-of-use asset obtained in exchange for lease obligations $ - $ 668 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents NEONODE INC. Notes to the Consolidated Financial Statements 1. Organization and Summary of Significant Accounting Policies Basis of Presentation and Preparation The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Neonode Inc. and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires making estimates and judgments that affect, at the date of the financial statements, the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses. Significant estimates and judgments include, but are not limited to: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, the standalone selling price of performance obligations, and transaction prices and assessing transfer of control; provisions for uncollectible receivables; for leases, determining whether a contract contains a lease, allocating consideration between lease and non-lease components, determining incremental borrowing rates, and identifying reassessment events, such as modifications; the valuation allowance related to our deferred tax assets; and the fair value of options issued for stock-based compensation. Actual results could differ from these estimates and judgments. Recently Issued Accounting Pronouncement Adopted In December 2023, the Financial Accounting Standards Board ("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 is effective for public business entities for fiscal years beginning after December 15, 2024, with early adoption permitted. We have adopted ASU 2023 - 09 for the fiscal year ended December 31, 2025, using a prospective approach. Prior period disclosures have not been adjusted to reflect the new disclosure requirements. The adoption did not have a material impact on our consolidated financial statements. See Note 11 Income Taxes in the accompanying notes to the consolidated financial statements for further detail. Recently Issued Accounting Pronouncements Pending Adoption In December 2025, the FASB issued ASU 2025 - 12, Codification Improvements ("ASU 2025 - 12" ). ASU 2025 - 12 makes incremental improvements to the Accounting Standards Codification and U.S. GAAP. This guidance is effective for annual reporting periods beginning after December 15, 2026 and interim reporting periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In December 2025, the FASB issued ASU 2025 - 11, Interim Reporting (Topic 270 ): Narrow-Scope Improvements (“ASU 2025 - 11” ). The amendments clarify and reorganize existing interim reporting guidance, including the scope of Topic 270 and interim disclosure requirements, and introduce a disclosure principle requiring entities to disclose material events or changes occurring since the most recent annual reporting period. ASU 2025 - 11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In September 2025, the FASB issued ASU 2025 - 06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350 - 40 ): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025 - 06” ), which aims to modernize financial reporting by updating how entities recognize and disclose costs incurred for software developed for internal use. ASU 2025 - 06 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In July 2025, the FASB issued ASU 2025 - 05, Financial Instruments – Credit Losses (Topic 326 ): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025 - 05" ), which amends ASC 326 - 20 to provide a practical expedient for all entities when estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. The practical expedient assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. ASU 2025 - 05 is effective for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years, with early adoption permitted, and should be applied on a prospective basis. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements. In November 2024, the FASB issued ASU 2024 - 03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses , requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU 2024 - 03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting ASU 2024 - 03. Foreign Currency Translation and Transaction Gains and Losses The functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen and the South Korean Won. The translation from Swedish Krona, Japanese Yen or South Korean Won to U.S. Dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for income statement accounts using a weighted-average exchange rate during the period. Gains or (losses) resulting from translation are included as a separate component of accumulated other comprehensive income (loss). Foreign currency translation gains (losses) were $( 246,000 ) and $( 54,000 ) during the years ended December 31, 2025 and 2024 , respectively. Gains or (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations and were $ 67,000 and $( 1,000 ) during the years ended December 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 income for combined continuing and discontinued operations of approximately $ 8.5 million for the year ended December 31, 2025 and net loss of approximately $ 6.5 million for the year ended December 31, 2024 , and had an accumulated deficit of approximately $ 215.6 million and $ 224.1 million as of December 31, 2025 and 2024 , respectively. In addition, operating activities used cash of approximately $ 10.3 million and $ 5.6 million for the years ended December 31, 2025 and 2024 , respectively. The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment of liabilities in the ordinary course of business. F- 8 Table of Contents Management has prepared an operating plan and believes that the Company has sufficient cash to meet its obligations as they come due for a year from the date the consolidated financial statements were issued. Accounts Receivable and Credit Losses Accounts receivable is stated at net realizable value. We estimate and record a provision for expected credit losses related to our financial instruments, including our trade receivables. We consider historical collection rates, the current financial status of our customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. Further, we consider macroeconomic factors and the status of the technology industry to estimate if there are current expected credit losses within our trade receivables based on the trends and our expectation of the future status of such economic and industry-specific factors. Also, specific allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have a higher probability of default. The accounts receivable balance on our consolidated balance sheet as of December 31, 2025 was $ 0.4 million, and did not include any allowances. The accounts receivable balance on our consolidated balance sheet as of December 31, 2024 was $ 0.7 million, and did not include any allowances. Concentration of Credit and Business Risks Our customers are primarily located in North America, Europe and Asia. As of December 31, 2025 , four of our customers represented approximately 95.4 % 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% or more of our revenues during the year ended December 31, 2025 are as follows. ● Seiko Epson – 34.3 % ● Alps Alpine – 19.4 % ● Hewlett-Packard – 19.0 % ● Commercial Vehicle OEM – 14.6 % Customers who accounted for 10% or more of our revenues during the year ended December 31, 2024 are as follows. ● Seiko Epson – 27.3 % ● Alps Alpine – 20.7 % ● Hewlett-Packard – 20.4 % ● Commercial Vehicle OEM – 11.8 % F- 9 Table of Contents Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation on property and equipment is recognized on a straight-line basis. Research and Development Research and development (“R&D”) costs are expensed as incurred. R&D costs consist primarily of personnel related costs in addition to external consultancy costs such as testing, certifying and measurements. Income Taxes We recognize deferred tax liabilities and assets for the expected future tax consequences of items that have been included in the consolidated financial statements or tax returns. We estimate income taxes based on rates in effect in each of the jurisdictions in which we operate. Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and expectations about future taxable income. Valuation allowances are recorded against net deferred tax assets when, in our opinion, realization is uncertain based on the “more likely than not” criteria of the accounting guidance. Based on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of December 31, 2025 and 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 (benefit) for income taxes represents the net change in deferred tax amounts, plus income taxes paid or payable for the current period. We follow U.S. GAAP related to accounting for uncertainty in income taxes, which prescribes a model for the recognition, measurement and presentation of uncertainty in income taxes. As a result, we did not recognize a liability for unrecognized tax benefits. As of December 31, 2025 and 2024 , we had no unrecognized tax benefits. F- 10 Table of Contents Fair Value of Financial Instruments We disclose the estimated fair values for all financial instruments for which it is practicable to estimate fair value. The carrying value of financial instruments including cash and cash equivalents, accounts receivable and accounts payable are deemed to approximate fair value due to their short maturities. Accounting guidance defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The three levels of the fair value hierarchy are described as follows: Level 1: Applies to assets or liabilities for which there are observable quoted prices in active markets for identical assets and liabilities. Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1 that are directly or indirectly observable. Level 3: Applies to assets or liabilities for which inputs are unobservable, and those inputs that are significant to the measurement of the fair value of the assets or liabilities. There were no assets or liabilities recorded at fair value on a recurring basis for the years ended December 31, 2025 and 2024 . Revenue We earn revenues from licensing of our intellectual property, licensing of our software and by performing engineering services. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of our performance obligations. License Fees We earn revenue from licensing our internally developed intellectual property (“IP”) and licensing of our internally developed software. We enter into IP licensing agreements that generally provide licensees with the right to incorporate our IP components in their products, with terms and conditions that vary by licensee. Fees under these agreements may include technology access fees payable upfront and royalties payable to us following the distribution by our licensees of products incorporating the licensed technology. The license for our IP has standalone value and can be used by the licensee without maintenance and support. For technology license arrangements that do not require significant modification or customization of the underlying technology, we recognize technology license revenue when the license is made available to the customer, and the customer has a right to use that license. We recognize royalties following the distribution by our licensees of products incorporating the licensed technology. At the end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make estimates of those royalties. We also earn license fee revenue by providing our customers with development licenses for our software tools related to the MultiSensing platform. We recognize revenue ratably over the contract term beginning on the commencement date of each contract, which is the date we make the software available to our customers. Our development license contracts with customers typically include a fixed amount of consideration and are generally non-cancellable and without any refund-type provisions. We typically invoice our customers annually in advance for our development licenses upon execution of the initial contract or subsequent renewal. F- 11 Table of Contents Non-Recurring Engineering For technology license that require modification or customization of the underlying technology to adapt the technology to customer use, we determine whether the technology license and required engineering consulting services represent separate performance obligations. We perform our analysis on a contract-by-contract basis. If there are separate performance obligations, we determine the standalone selling price (“SSP”) of each separate performance obligation to properly recognize revenue as each performance obligation is satisfied. We provide engineering consulting services to our customers under a signed Statement of Work (“SOW”). Deliverables and payment terms are specified in each SOW. We charge an hourly rate or a fixed fee for engineering services. We recognize revenues for hourly rate services as engineering services specified in contracts are completed and accepted by our customers. Revenues for fixed price services are generally recognized over time applying input methods to estimate progress to completion. We believe that recognizing non-recurring engineering services revenues as progress towards completion of engineering services and customer acceptance of those services occurs best reflects the economics of those transactions, because engineering services as tracked in our systems correspond directly with the value to our customers of our performance completed to date. Hours performed for each engineering project are tracked and reflect progress made on each project and are charged at a consistent hourly rate. Any upfront payments we receive for future non-recurring engineering services are recorded as unearned revenue until that revenue is earned. Revenues from non-recurring engineering contracts that are short-term in nature are recorded when those services are complete and accepted by customers. The following tables present the net revenues distribution by geographical area and market (in thousands, except percentages): Years ended December 31, 2025 2024 Amount Percentage Amount Percentage North America: Net revenues from IT & Industrial $ 425 100.0 % $ 763 100.0 % $ 425 100.0 % $ 763 100.0 % Asia Pacific: Net revenues from Automotive $ 394 30.4 % $ 732 39.4 % Net revenues from IT & Industrial 900 69.6 % 1,127 60.6 % $ 1,294 100.0 % $ 1,859 100.0 % Europe, Middle East and Africa: Net revenues from Automotive $ 343 100.0 % $ 486 100.0 % $ 343 100.0 % $ 486 100.0 % Contract Balances Timing of revenue recognition may differ from the timing of invoice and receipt of consideration. We record a receivable or unbilled revenue when we have an unconditional right to receive consideration from customers. Contract assets represent revenue recognized for performance to date when the right to consideration is conditional on something other than the passage of time. We record contract liabilities when we receive prepayments or upfront payments ahead of performance. F- 12 Table of Contents The following table presents our accounts receivable, net, contract assets, and contract liabilities (in thousands): December 31, 2025 2024 2023 Accounts receivable and unbilled revenues, net $ 391 $ 732 $ 652 Contract assets - 51 - Contract liabilities (deferred revenues) 37 - 2 Payment terms and conditions vary by the type of contract; however, payments generally occur 30 - 60 days after invoicing for license fees. Where revenue recognition timing differs from invoice timing, we have determined that our contracts do not include a significant financing component. Applying the practical expedient in Topic 606, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers, not to provide financing to our customers. Contract Liabilities Contract liabilities (deferred revenues) consist primarily of prepayments for license fees, and other services that we have been paid in advance. We earn the revenue when we transfer control of the service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services. The following table presents our deferred revenues by source: December 31, 2025 2024 2023 Deferred revenues license fees $ - $ - $ 2 Deferred revenues non-recurring engineering 37 - - $ 37 $ - $ 2 Deferred revenues were $ 37,000 as of December 31, 2025 . The Company recognized revenues of approximately zero and $ 2,000 , for the years ended December 31, 2025 and 2024 , respectively, related to contract liabilities outstanding at the beginning of the year. Costs to Obtain Contracts We record the incremental costs of obtaining a contract with a customer as a contract asset if we expect the benefit of those costs to cover a period greater than one year. We currently have no incremental costs that must be capitalized. We expense as incurred costs of obtaining a contract when the amortization period of those costs would have been less than or equal to one year. 2. Discontinued Operations During the fourth quarter of 2023 the Company decided to phase out the product business and as a consequence terminate production at the Pronode Technologies AB facilities in Kungsbacka, Sweden. Subsequently, we commenced the phase out of our TSM product business during the first quarter of 2024 through licensing of the TSM technology to strategic partners or outsourcing. In May 2024, we stopped producing TSMs and started to shut down the factory. The facility lease terminated as of September 30, 2024 and was not renewed. The Company concluded that the termination of TSM manufacturing met the criteria for discontinued operations. As a result, this business has been reclassified to discontinued operations in these consolidated financial statements for all periods presented. F- 13 Table of Contents Assets and Liabilities of Discontinued Operations Assets and liabilities of discontinued operations are presented separately in the consolidated balance sheets for all periods presented. On December 31, 2025 and December 31, 2024 , these balances consisted of assets and liabilities of the Company’s Products business. The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the assets and liabilities of discontinued operations as presented on the Company’s consolidated balance sheets (in thousands): December 31, 2025 December 31, 2024 ASSETS OF DISCONTINUED OPERATIONS Current assets of discontinued operations: Accounts receivable and unbilled revenues, net $ 41 $ - Total current assets of discontinued operations 41 - Total assets of discontinued operations $ 41 $ - Loss from Discontinued Operations Discontinued operations for the years ended December 31, 2025 and 2024 , respectively, consist of results from the Company’s products business. F- 14 Table of Contents The following table provides details about the major classes of line items constituting “Income (loss) from discontinued operations” as presented on the Company’s consolidated statements of operations (in thousands): Years ended December 31, 2025 2024 Revenues: Products $ 361 $ 1,171 Total revenues 361 1,171 Cost of revenues: Products 48 989 Total cost of revenues 48 989 Gross margin 313 182 Operating expenses: Sales and marketing ( 143 ) 165 General and administrative - 590 Total operating expenses ( 143 ) 755 Operating income (loss) 456 ( 573 ) Other income (expense), net - ( 18 ) Loss before provision for income taxes 456 ( 591 ) Income (loss) from discontinued operations $ 456 $ ( 591 ) Cash Flows Information The following table presents cash flow information for discontinued operations: Years ended December 31, 2025 2024 Depreciation and amortization $ - $ 19 Amortization of operating lease ROU assets - 52 Inventory impairment loss - 357 Bad debt expense - 172 Proceeds from sale of property and equipment - 190 3. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): Years ended December 31, 2025 2024 Prepaid insurance $ 89 $ 93 Prepaid rent 7 - VAT receivable 218 172 Other 181 210 Prepaid expenses and other current assets $ 495 $ 475 F- 15 Table of Contents 4. Property and Equipment Property and equipment, net consist of the following (in thousands): Years ended December 31, 2025 2024 Computers, software, furniture and fixtures $ 286 $ 277 Equipment and vehicles 129 21 Less accumulated depreciation and amortization ( 270 ) ( 236 ) Property and equipment, net $ 145 $ 62 Depreciation and amortization expense was $ 50,000 and $ 39,000 for the years ended December 31, 2025 and 2024 , respectively. 5. Accrued Expenses Accrued expenses consist of the following (in thousands): Years ended December 31, 2025 2024 Accrued audit fees $ 6 $ 74 Accrued other compensations 205 107 Accrued bonus costs 136 172 Accrued consulting fees and other 112 51 Total accrued expenses $ 459 $ 404 6. Stockholders ’ Equity Preferred Stock As of December 31, 2025 and 2024 , our Restated Certificate of Incorporation, as amended, authorized us to issue up to 1,000,000 shares of preferred stock, par value $ 0.001 per share. There were no transactions in our preferred stock during the years ended December 31, 2025 and 2024 . No shares of preferred stock were issued and outstanding as of December 31, 2025 and 2024 . Common Stock As of December 31, 2025 and 2024 , our Restated Certificate of Incorporation, as amended, authorized us to issue up to 25,000,000 shares of common stock, par value $ 0.001 per share. During the year ended December 31, 2025 , we sold no shares under the Ladenburg ATM Facility. During the year ended December 31, 2024 , we sold an aggregate of 1,423,441 shares of our common stock under the Ladenburg ATM Facility with aggregate net proceeds to us of $ 5.8 million, after payment of commissions to Ladenburg and other expenses of $ 0.2 million. 7. Stock-Based Compensation We have adopted equity incentive plans for which stock options and restricted stock awards are available for grants to employees, consultants and directors. Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There is no vesting provisions tied to performance conditions for any options. Vesting for all outstanding option grants is based solely on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments. F- 16 Table of Contents Stock Options and Long-Term Incentive Plan During the year ended December 31, 2020, our stockholders approved the 2020 Plan which replaced our 2015 Stock Incentive Plan (the “2015 Plan”), which in turn replaced our Neonode Inc. 2006 Equity Incentive Plan (the “2006 Plan”). There are no awards outstanding under the 2006 Plan and 2015 Plan. Under the 2020 Plan, 750,000 shares of common stock have been reserved for awards, including non-qualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2020 Plan are set by our compensation committee at its discretion. In 2020, we established the 2020 LTIP to provide eligible persons with the opportunity to acquire an equity interest, or otherwise increase their equity interest, in the Company as an incentive for them to remain in the service of the Company. Through the 2020 LTIP, eligible employees of Neonode may waive between 50 % to 67 % of future unearned bonuses that may be awarded to them under the Company’s annual bonus arrangement in exchange for the grant of shares of the Company’s common stock. As of December 31, 2025 and 2024 no awards were outstanding under either of the plans. There has been no activity under the stock option plans during the years ended December 31, 2025 and 2024 . Stock options granted under the 2006, 2015 and 2020 Plans are exercisable over a maximum term of 10 years from the date of grant, vest in various installments over a one to four -year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant. 8. Commitments and Contingencies Legal The Company is subject to legal proceedings and claims that may arise in the ordinary course of business. The Company is not aware of any pending or threatened litigation matters at this time that would have a material impact on the operations of the Company. 9. Leases The Company has leases mainly consisting of the corporate office. The lease had an original lease term of two years and is extended on a yearly basis unless written notice is provided nine months prior to the expiration date. Future renewal options that are not likely to be executed as of the consolidated balance sheet date are excluded from right-of-use assets and related lease liabilities. The lease is automatically renewed at a cost increase of 2 % on an annual basis, unless we provide written notice nine months prior to the respective expiration dates. Operating lease right of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company has entered into various short-term operating leases with an initial term of twelve months or less. These leases are not recorded on the Company's Consolidated Balance Sheets. All operating lease expense is recognized on a straight-line basis over the lease term. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. For finance leases, the implicit rate is used, since it is readily available. F- 17 Table of Contents The components of lease expense were as follows (in thousands): Years ended December 31, 2025 2024 Finance lease cost: Amortization of leased assets $ 19 $ 6 Interest on leased liabilities 1 1 Operating lease cost 400 31 Short-term lease cost 83 418 Total lease cost $ 503 $ 456 The Company made cash payments regarding operating leases of $ 385,000 and $ 27,000 for the years ended December 31, 2025 and 2024 , respectively. The Company made cash payments regarding finance leases of $ 25,000 and $ 18,000 for the years ended December 31, 2025 and 2024 , respectively. The following table shows right-of-use assets and lease liabilities (in thousands): December 31, 2025 2024 Right-of-use assets: Operating leases $ 455 $ 634 Finance leases 54 21 Total right-of-use assets $ 509 $ 655 Lease liabilities: Current portion of operating lease obligations $ 344 $ 225 Operating lease obligations, net of current portion - 319 Current portion of finance lease obligations 12 2 Finance lease obligations, net of current portion 15 - Total lease liabilities $ 371 $ 546 Lease liability maturities are as follows (in thousands): Operating Leases Finance Leases Total 2026 $ 354 $ 13 $ 367 2027 - 13 13 2028 - 2 2 Total $ 354 $ 28 $ 382 Less: Imputed interest ( 10 ) ( 1 ) ( 11 ) Total lease liabilities $ 344 $ 27 $ 371 Lease liabilities, current $ 344 $ 12 $ 356 Lease liabilities, non-current - 15 15 Total lease liabilities $ 344 $ 27 $ 371 The weighted-average remaining lease term related to the Company’s operating lease liabilities as of December 31, 2025 and December 31, 2024 was 1.0 years and 1.9 years, respectively. The discount rate related to the Company’s operating lease liabilities as of December 31, 2025 and December 31, 2024 was 5.0 % for each of the years. The weighted-average remaining lease term related to the Company’s finance lease liabilities as of December 31, 2025 and December 31, 2024 was 2.2 years and 0.2 years, respectively. The discount rate related to the Company’s operating lease liabilities as of December 31, 2025 and December 31, 2024 was 3.5 % and 3.0 %, respectively. F- 18 Table of Contents 10. Segment Information The Company operates as one operating segment. Our chief operating decision maker ("CODM") is our Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating loss and net loss to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of revenues, research and development, sales and marketing, and general and administrative expenses. The following table presents key financial information with respect to the Company’s single operating segment (in thousands): Years ended December 31, 2025 2024 Revenues $ 2,062 $ 3,108 Costs and expenses (a) : Cost of revenues 26 116 Product R&D 195 151 General and administrative, including rent 1,138 1,297 Payroll and related 6,736 6,332 Professional fees and IP 1,651 1,351 Marketing and travel 429 483 Total costs and expenses 10,175 9,730 Other segment items (b) 15,484 75 Other income, net 657 687 Income (loss) before provision (benefit) for income taxes 8,028 ( 5,860 ) Provision (benefit) for income taxes ( 9 ) 15 Income (loss) from continuing operations $ 8,037 $ ( 5,875 ) (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 net proceeds from patent settlement, 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 (in thousands): December 31, 2025 2024 United States $ 72 $ - Sweden 528 696 Total $ 600 $ 696 We report revenues from external customers based on the country where the customer is located. The following table presents net revenues by country (in thousands, except percentages): Years ended December 31, 2025 2024 Amount Percentage Amount Percentage Japan $ 1,276 62.0 % $ 1,731 55.8 % Sweden 300 14.5 % 365 11.7 % Germany 42 2.0 % 116 3.7 % China 16 0.8 % 97 3.1 % South Korea 1 - % 31 1.0 % Other 2 0.1 % 5 0.2 % $ 1,637 79.4 % $ 2,345 75.5 % United States 425 20.6 % 763 24.5 % Total $ 2,062 100.0 % $ 3,108 100.0 % F- 19 Table of Contents 11. Income Taxes Income (loss) from continuing operations before provision (benefit) for income taxes was distributed geographically as follows (in thousands): Years ended December 31, 2025 2024 Domestic $ 8,263 $ ( 5,888 ) Foreign ( 235 ) 28 Total $ 8,028 $ ( 5,860 ) The provision (benefit) for income taxes from continuing operations is as follows (in thousands): Years ended December 31, 2025 2024 Current Federal $ - $ - State - - Foreign ( 9 ) 15 Total current expense (benefit) ( 9 ) 15 Deferred Federal 2,393 ( 784 ) State - 99 Foreign ( 623 ) 23 Change in valuation allowance ( 1,770 ) 662 Total deferred expense - - Total provision (benefit) for income taxes $ ( 9 ) $ 15 Pursuant to the disclosure requirements of ASU 2023 - 09, the differences between our effective income tax rate from continuing operations and the U.S. federal statutory income tax rate for the year ended December 31, 2025, are as follows (in thousands, except percentages): Year ended December 31, 2025 Dollars Percent US federal statutory tax rate $ 1,686 21.0 % State & local income taxes, net of federal effect (a) - - % Foreign tax effects Sweden Return to provision adjustment ( 572 ) ( 7.1 )% Changes in valuation allowance 529 6.6 % Other 6 0.1 % Other Jurisdictions ( 17 ) ( 0.2 )% Changes in tax laws or rates in current period - - % Cross border tax laws Global Intangible Low-Taxed Income 640 8.0 % Tax credits - - % Changes in valuation allowance ( 2,298 ) ( 28.6 )% Nontaxable or nondeductible items 17 0.2 % Changes in unrecognized tax benefits - - % Effective tax rate $ ( 9 ) ( 0.1 )% (a) The state that makes up the majority of the state & local income taxes category is California. The differences between our effective income tax rate and the U.S. federal statutory income tax rate for continuing operations for the year ended December 31, 2024, are as follows: Year ended December 31, 2024 Amounts at statutory tax rates 21.0 % Foreign losses taxed at different rates ( 2.0 )% Stock-based compensation - % GILTI inclusion ( 8.0 )% Other - % Total 11.0 % Valuation allowance ( 11.0 )% Effective tax rate - % Significant components of the deferred tax asset balances are as follows (in thousands): Years ended December 31, 2025 2024 Deferred tax assets: Accruals $ - $ - Net operating losses 20,274 22,124 Gross deferred tax assets 20,274 22,124 Valuation allowance ( 20,244 ) ( 22,108 ) Total deferred tax assets 30 16 Deferred tax liabilities: Basis difference in fixed assets ( 15 ) - Accruals ( 15 ) ( 16 ) Net deferred tax assets $ - $ - Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023 - 09 for the year ended December 31,2025 is as follows (in thousands): Year ended December 31, 2025 Federal $ - State - Foreign Germany ( 10 ) Other 1 Cash paid (received) for income taxes, net of refunds received $ ( 9 ) F- 20 Table of Contents Valuation allowances are recorded to offset certain deferred tax assets due to management’s uncertainty of realizing the benefits of these items. Management applies a full valuation allowance for the accumulated losses of Neonode Inc., and its subsidiaries, since it is not determinable using the “more likely than not” criteria that there will be any future benefit of our deferred tax assets. This is mainly due to our history of operating losses. As of December 31, 2025, we had federal, state and foreign net operating losses of $ 73.2 million, $ 18.7 million and $ 17.5 million, respectively. Of the total federal loss carryforward, approximately $ 47.0 million will begin to expire in 2031 and the remainder do not expire. The California loss carryforward will begin to expire in 2030. The foreign loss carryforward, which is generated in Sweden, does not expire. Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and tax credit carryforwards before utilization. We follow the provisions of accounting guidance which includes a two -step approach to recognizing, derecognizing and measuring uncertain tax positions. There were no unrecognized tax benefits for the years ended December 31, 2025 and 2024. We follow the policy to classify accrued interest and penalties as part of the accrued tax liability in the provision for income taxes. For the years ended December 31, 2025 and 2024 we did not recognize any interest or penalties related to unrecognized tax benefits. As of December 31, 2025, we had no uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations. We file income tax returns in the U.S. federal jurisdiction, California, Sweden, and Japan. The 2008 through 2024 tax years are open and may be subject to potential examination in one or more jurisdictions. We are not currently under any federal, state or foreign income tax examinations. 12. Employee Benefit Plans We participate in a number of individual defined contribution pension plans for our employees in Sweden. We contribute between 4.5 % and 30 % of the employee’s annual salary to these pension plans depending on age and salary level. Contributions relating to these defined contribution plans for the years ended December 31, 2025 and 2024 were $ 533,000 and $ 542,000 , respectively. We match U.S. employee contributions to a 401 (K) retirement plan up to a maximum of six percent ( 6 %) of an employee’s annual salary. Contributions relating to the matching 401 (K) contributions for the years ended December 31, 2025 and 2024 were $ 6,000 and $ 6,000 , respectively. In Taiwan, we contribute six percent ( 6 %) of the employee’s annual salary to a pension fund which agrees with Taiwan’s Labor Pension Act. Contributions relating to the Taiwanese pension fund for the years ended December 31, 2025 and 2024 were $ 3,000 and $ 3,000 , respectively. 13. Net Loss Per Share Basic net loss per common share for the years ended December 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 during the year. Diluted loss per common share is computed by dividing net loss attributable to common shareholders of Neonode Inc. for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding during the year. The Company had no potential common stock equivalents as of December 31, 2025 or 2024 . Years ended December 31, (in thousands, except per share amounts) 2025 2024 BASIC AND DILUTED Weighted average number of common shares outstanding 16,783 15,873 Income (loss) from continuing operations $ 8,037 $ ( 5,875 ) Income (loss) from discontinued operations 456 ( 591 ) Net income (loss) $ 8,493 $ ( 6,466 ) Income (loss) per share from continuing operations - basic and diluted $ 0.48 $ ( 0.37 ) Income (loss) per share from discontinued operations - basic and diluted 0.03 ( 0.04 ) Net income (loss) per share - basic and diluted $ 0.51 $ ( 0.41 ) 14. Subsequent Events No subsequent events have occurred that would require recognition in the consolidated financial statements or disclosure in the notes thereto. F- 21 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.