Neonode(NEON) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents Neonode Inc.'s unaudited condensed consolidated financial statements and accompanying notes for the specified interim periods Unaudited Condensed Consolidated Balance Sheets | (In thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | ASSETS | | | | Cash and cash equivalents | $13,238 | $16,427 | | Total current assets | $14,405 | $17,685 | | Total assets | $15,058 | $18,381 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Total current liabilities | $2,215 | $1,620 | | Total liabilities | $2,406 | $1,939 | | Total stockholders' equity | $12,652 | $16,442 | | Total liabilities and stockholders' equity | $15,058 | $18,381 | - Total assets decreased by $3.323 million (18.08%) from $18.381 million at December 31, 2024, to $15.058 million at June 30, 2025[10] - Cash and cash equivalents decreased by $3.189 million (19.41%) during the same period[10] Unaudited Condensed Consolidated Statements of Operations | (In thousands, except per share amounts) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $599 | $801 | $1,112 | $1,615 | | Gross margin | $593 | $777 | $1,097 | $1,574 | | Operating loss | $(2,110) | $(1,789) | $(4,075) | $(3,675) | | Net loss | $(1,868) | $(1,695) | $(3,601) | $(3,779) | | Basic and diluted loss per share | $(0.11) | $(0.11) | $(0.21) | $(0.25) | - Total revenues decreased by 25.2% for the three months ended June 30, 2025, and by 31.1% for the six months ended June 30, 2025, compared to the same periods in 2024[12] - Net loss increased for the three-month period from $(1.695) million to $(1.868) million but decreased for the six-month period from $(3.779) million to $(3.601) million year-over-year[12] Unaudited Condensed Consolidated Statements of Comprehensive Loss | (In thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(1,868) | $(1,695) | $(3,601) | $(3,779) | | Foreign currency translation adjustments | $(55) | $(32) | $(189) | $(66) | | Comprehensive loss | $(1,923) | $(1,727) | $(3,790) | $(3,845) | - Comprehensive loss increased for the three months ended June 30, 2025, to $(1.923) million from $(1.727) million in 2024, primarily due to higher net loss and foreign currency translation adjustments[15] - For the six months, comprehensive loss slightly decreased to $(3.790) million from $(3.845) million, despite increased foreign currency translation losses[15] Unaudited Condensed Consolidated Statements of Stockholders' Equity | (In thousands) | Balances, December 31, 2024 | Balances, June 30, 2025 | | :--------------- | :-------------------------- | :---------------------- | | Common Stock Amount | $17 | $17 | | Additional Paid-in Capital | $240,955 | $240,955 | | Accumulated Other Comprehensive Loss | $(450) | $(639) | | Accumulated Deficit | $(224,080) | $(227,681) | | Total Stockholders' Equity | $16,442 | $12,652 | - Total stockholders' equity decreased by $3.79 million from $16.442 million at December 31, 2024, to $12.652 million at June 30, 2025, primarily driven by net losses and foreign currency translation adjustments[18] Unaudited Condensed Consolidated Statements of Cash Flows | (In thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(3,110) | $(3,135) | | Net cash provided by (used in) investing activities | $(15) | $153 | | Net cash used in financing activities | $(5) | $(13) | | Net change in cash and cash equivalents | $(3,189) | $(3,048) | | Cash and cash equivalents at end of period | $13,238 | $13,107 | - Net cash used in operating activities remained stable at approximately $3.1 million for both six-month periods[21] - Investing activities shifted from providing $0.153 million cash in 2024 to using $0.015 million in 2025[21] - Overall, cash and cash equivalents decreased by $3.189 million in the first six months of 2025, ending at $13.238 million[21] Notes to Unaudited Condensed Consolidated Financial Statements - The company adopted ASU 2023-07, Segment Reporting, retrospectively in the interim period ended March 31, 2025, enhancing disclosures about significant segment expenses[24] - Neonode incurred net losses of approximately $1.9 million and $3.6 million for the three and six months ended June 30, 2025, respectively[28] - The company had an accumulated deficit of approximately $227.7 million as of June 30, 2025, but management believes sufficient cash exists for the next year on a going concern basis[29] Customer Concentration (Percentage of Net Revenues) | Customer Category | 3 months ended June 30, 2025 | 6 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Commercial Vehicle OEM | 34.1% | 21.3% | 24.8% | 13.8% | | Seiko Epson | 23.8% | 30.8% | 25.3% | 22.5% | | Hewlett-Packard Company | 19.1% | 19.3% | 16.8% | 23.9% | | Alps Alpine | 17.5% | 22.3% | 23.2% | 23.0% | - The company phased out its TSM product business, terminating production at Pronode Technologies AB facilities during Q4 2023 and Q1 2024, reclassifying this business as discontinued operations[38][39] Income (Loss) from Discontinued Operations (in thousands) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Six months ended June 30, 2025 | Six months ended June 30, 2024 | | :--------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $45 | $623 | $112 | $823 | | Gross (loss) margin | $9 | $162 | $76 | $(18) | | Operating income (loss) | $116 | $(18) | $183 | $(386) | | Income (loss) from discontinued operations | $116 | $(18) | $183 | $(386) | - Neonode operates as a single operating segment, with the CEO reviewing consolidated financial information to assess performance and allocate resources[53] Net Revenues by Country (in thousands) | Country | Three months ended June 30, 2025 (Amount) | Three months ended June 30, 2025 (Percentage) | Six months ended June 30, 2025 (Amount) | Six months ended June 30, 2025 (Percentage) | | :------ | :---------------------------------------- | :-------------------------------------------- | :-------------------------------------- | :-------------------------------------------- | | Japan | $262 | 43.7% | $612 | 55.0% | | Sweden | $204 | 34.1% | $237 | 21.3% | | United States | $115 | 19.2% | $228 | 20.5% | | Total | $599 | 100.0% | $1,112 | 100.0% | - New U.S. tax legislation (OBBB Act) was signed into law on July 4, 2025, with the company evaluating its impact but not expecting a material effect[58] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Neonode's financial condition and results of operations, analyzing revenues, expenses, net loss, liquidity, and capital resources - Neonode provides advanced optical sensing solutions using zForce and MultiSensing technologies for various markets including office equipment, automotive, and industrial automation[62] - As of June 30, 2025, Neonode had 37 valid technology license agreements with global OEMs, ODMs, and automotive Tier 1 suppliers, with ten customers currently shipping products embedding their technology[63][64] - Ongoing global conflicts have created economic uncertainty, impacting supply chains, financial markets, and currency exchange rates, which could adversely affect Neonode's financial conditions[67] Results of Operations Key Financial Results (Continuing Operations, in thousands) | (in thousands) | Three months ended June 30, 2025 | Three months ended June 30, 2024 | Variance (Dollars) | Variance (Percent) | | :--------------- | :------------------------------- | :------------------------------- | :----------------- | :----------------- | | Total Revenue | $599 | $801 | $(202) | (25.2)% | | Total gross margin | $593 | $777 | $(184) | (23.7)% | | Total operating expenses | $2,703 | $2,566 | $137 | 5.3% | | Operating loss | $(2,110) | $(1,789) | $(321) | 17.9% | | Loss from continuing operations | $(1,984) | $(1,677) | $(307) | 18.3% | Key Financial Results (Continuing Operations, in thousands) | (in thousands) | Six months ended June 30, 2025 | Six months ended June 30, 2024 | Variance (Dollars) | Variance (Percent) | | :--------------- | :----------------------------- | :----------------------------- | :----------------- | :----------------- | | Total Revenue | $1,112 | $1,615 | $(503) | (31.1)% | | Total gross margin | $1,097 | $1,574 | $(477) | (30.3)% | | Total operating expenses | $5,172 | $5,249 | $(77) | (1.5)% | | Operating loss | $(4,075) | $(3,675) | $(400) | 10.9% | | Loss from continuing operations | $(3,784) | $(3,393) | $(391) | 11.5% | Revenues - Total revenues decreased by 25.2% to $0.6 million for the three months and 31.1% to $1.1 million for the six months ended June 30, 2025, primarily due to lower license fees[72] License Fees - License fees decreased by 34.2% to $0.4 million for the three months and 35.0% to $0.9 million for the six months ended June 30, 2025, mainly due to lower demand for legacy customers' products[73] Non-recurring Engineering - Non-recurring engineering (NRE) revenues increased by 4.3% to $0.2 million for the three months ended June 30, 2025, due to a Commercial OEM DMS project delivery[74] - NRE revenues decreased by 7.5% for the six months ended June 30, 2025, due to fewer projects[74] Net Revenues by Market and Revenue Stream (in thousands) | (in thousands) | Three months ended June 30, 2025 (Amount) | Three months ended June 30, 2025 (Percentage) | Six months ended June 30, 2025 (Amount) | Six months ended June 30, 2025 (Percentage) | | :--------------- | :---------------------------------------- | :-------------------------------------------- | :-------------------------------------- | :-------------------------------------------- | | Automotive | | | | | | License fees | $143 | 44.3% | $321 | 63.1% | | Non-recurring engineering | $180 | 55.7% | $188 | 36.9% | | Total Automotive | $323 | 100.0% | $509 | 100.0% | | IT & Industrial | | | | | | License fees | $261 | 94.6% | $580 | 96.2% | | Non-recurring engineering | $15 | 5.4% | $23 | 3.8% | | Total IT & Industrial | $276 | 100.0% | $603 | 100.0% | Gross Margin - Gross margin improved to 99.0% for the three months and 98.7% for the six months ended June 30, 2025, compared to 97.0% and 97.5% for the same periods in 2024, respectively[76] Research and Development - R&D expenses increased by 10.2% to $1.1 million for the three months and 9.6% to $2.0 million for the six months ended June 30, 2025, primarily due to higher payroll and related costs[77] Sales and Marketing - Sales and marketing expenses increased by 9.6% to $0.6 million for the three months ended June 30, 2025, due to higher payroll[79] - Sales and marketing expenses decreased by 9.0% to $1.2 million for the six months, driven by lower payroll and marketing spend[79] General and Administrative - General and administrative expenses decreased by 1.3% to $1.0 million for the three months and 6.6% to $1.9 million for the six months ended June 30, 2025, due to lower professional fees and overall costs, respectively[81] Other Income - Other income remained stable at approximately $0.1 million for the three months and $0.3 million for the six months ended June 30, 2025, primarily from interest income[82] Income Taxes - The effective tax rate was zero for the three months and 0.3% for the six months ended June 30, 2025, influenced by global intangible low-taxed income and changes in valuation allowance[83] Net Loss - Loss from continuing operations increased to $1.9 million for the three months and $3.7 million for the six months ended June 30, 2025, compared to $1.7 million and $3.4 million for the same periods in 2024, respectively[84] Liquidity and Capital Resources - Cash and cash equivalents were $13.2 million as of June 30, 2025, down from $16.4 million at December 31, 2024[85] - Working capital was $12.1 million, down from $16.1 million[86] - Net cash used in operating activities for combined continuing and discontinued operations was $3.1 million for both six-month periods ended June 30, 2025 and 2024[87] - The company incurred net losses of approximately $1.9 million and $3.6 million for the three and six months ended June 30, 2025, respectively, and had an accumulated deficit of approximately $227.7 million as of June 30, 2025[90] - Management believes current cash and planned expenditures are sufficient for the next twelve months, but future operations may require additional capital through equity investments or debt arrangements[92][93] - Neonode entered into a Ladenburg ATM Facility on June 4, 2024, to sell up to $10 million of common stock, but no shares were sold under this facility during the three and six months ended June 30, 2025 and 2024[102][105] - Aequitas Sub, to whom Neonode assigned a patent portfolio, reached a settlement in principle with Samsung regarding U.S. Patent No. 8,095,879, leading to a stay of deadlines until August 20, 2025[110] - The case against Apple remains stayed[111] - U.S. Patent No. 8,812,993, also assigned to Aequitas, was invalidated by the PTAB in June 2022, and this decision was affirmed by the Federal Circuit on June 11, 2024[112] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms no applicable quantitative or qualitative disclosures regarding market risk for the company Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses in IT general controls and income tax calculations - Disclosure controls and procedures were deemed ineffective as of June 30, 2025, due to material weaknesses in internal control over financial reporting[114] - Identified material weaknesses include a lack of IT general controls to prevent management override and insufficient controls for income tax calculations and related disclosures[115][116] - Remediation efforts, including implementing user-specific permission sets and monitoring changelogs, are underway but not yet tested for effectiveness[115] PART II. OTHER INFORMATION Item 1. Legal Proceedings Neonode Inc. is not a party to any pending legal proceedings that would materially impact its operations - The company is not a party to any pending legal proceedings[120] Item 1A. Risk Factors No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024, are reported - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024[121] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds are reported for the period - No unregistered sales of equity securities and use of proceeds to report[122] Item 3. Defaults Upon Senior Securities No defaults upon senior securities are reported - Not applicable, no defaults upon senior securities[123] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to the company - Not applicable, no mine safety disclosures[124] Item 5. Other Information No other information is reported - No other information to report[125] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL data Key Exhibits Filed | Exhibit | Description | | :-------- | :---------- | | 3.1 | Restated Certificate of Incorporation of Neonode Inc. | | 3.2 | Amended and Restated Bylaws | | 31.1* | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002 | | 31.2* | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act Of 2002 | | 101.INS | Inline XBRL Instance Document. | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |