Neonode(NEON) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements The company's financial statements for September 30, 2023, show increased assets and widened net loss Condensed Consolidated Balance Sheets Total assets increased to $24.8 million by September 30, 2023, driven by cash from stock issuance Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 (Audited) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $18,471 | $14,816 | | Total current assets | $24,463 | $20,798 | | Total assets | $24,817 | $21,198 | | Liabilities & Equity | | | | Total current liabilities | $1,813 | $1,699 | | Total liabilities | $1,837 | $1,780 | | Total stockholders' equity | $22,980 | $19,418 | Condensed Consolidated Statements of Operations Q3 2023 revenues decreased to $1.0 million, with net loss widening; YTD revenues fell to $3.5 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,003 | $1,216 | $3,456 | $3,801 | | Gross margin | $776 | $1,138 | $3,145 | $3,553 | | Operating loss | $(1,457) | $(962) | $(4,656) | $(4,039) | | Net loss attributable to Neonode Inc. | $(1,266) | $(800) | $(4,198) | $(3,728) | | Basic and diluted loss per share | $(0.08) | $(0.06) | $(0.27) | $(0.27) | Condensed Consolidated Statements of Cash Flows Net cash used in operations improved, with financing providing $7.8 million from stock, increasing cash Cash Flow Summary for the nine months ended September 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(4,100) | $(5,694) | | Net cash used in investing activities | $(58) | $(54) | | Net cash provided by (used in) financing activities | $7,789 | $(147) | | Net increase (decrease) in cash | $3,655 | $(6,081) | | Cash and cash equivalents at end of period | $18,471 | $11,302 | Notes to the Unaudited Condensed Consolidated Financial Statements Notes detail optical sensing operations, going concern, revenue recognition, customer concentration, and commitments - The company develops and markets optical sensing solutions for contactless touch, gesture sensing, and object detection, serving markets like office equipment, automotive, and medical[23] - Despite a history of significant operating losses and negative cash flows, management believes the company's operating plan and ATM facility are sufficient to continue as a going concern[25][27] - As of September 30, 2023, four customers accounted for approximately 75% of consolidated accounts receivable and unbilled revenues[51] - The company has an agreement to pay Texas Instruments $500,000 in non-recurring engineering costs at a rate of $0.25 per ASIC for the first 2 million units sold; no payments have been made as of September 30, 2023[121] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses business model, reporting decreased revenues, widened losses, and improved liquidity - The company's business is based on licensing its zForce and MultiSensing technology platforms, selling Touch Sensor Modules (TSMs), and providing non-recurring engineering (NRE) services[137][138][141] Financial Results Summary (in thousands) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,003 | $1,216 | $3,456 | $3,801 | | Operating Loss | $(1,457) | $(962) | $(4,656) | $(4,039) | | Net Loss (to Neonode) | $(1,266) | $(800) | $(4,198) | $(3,728) | - The company raised $7.9 million in net proceeds during the first nine months of 2023 through its At-the-Market (ATM) offering program, selling 903,716 shares of common stock[192] - Management believes the company has sufficient capital to fund operations for the next twelve months, based on its cash position of $18.5 million as of September 30, 2023[177] Results of Operations Q3 2023 net revenues decreased to $1.0 million; gross margin dropped, operating loss widened - Q3 2023 license fee revenues decreased by 20% to $0.8 million compared to Q3 2022, primarily due to lower sales volumes from customers[148][152] - Gross margin for products in Q3 2023 was negative 39%, compared to 48% in Q3 2022, mainly due to a one-time cost of $143,000 from a customer claim[158] - Sales and marketing expenses for Q3 2023 increased by 48.3% to $0.5 million, primarily due to higher marketing costs[148][161] - R&D expenses for the nine months ended September 30, 2023, decreased by 9.1% to $2.7 million, mainly due to lower personnel and related costs[149][160] Liquidity and Capital Resources Cash and equivalents increased to $18.5 million from ATM proceeds, ensuring liquidity for twelve months Liquidity Position (in millions) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $18.5 | $14.8 | | Working capital | $22.7 | $19.1 | - Net cash used in operating activities for the nine months ended September 30, 2023, was $4.1 million, primarily resulting from a net loss of $4.2 million[179] - Net cash provided by financing activities was $7.8 million for the nine months ended September 30, 2023, almost entirely from the issuance of common stock under the ATM Facility[182] - Management evaluated the company's operating losses and determined its cash position and ATM facility are sufficient to alleviate going concern issues[184] Quantitative and Qualitative Disclosures about Market Risk This section is not applicable for the reporting period - Not applicable[198] Controls and Procedures Disclosure controls and procedures were effective as of September 30, 2023, with no material changes - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective at providing reasonable assurance[199] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[201] PART II OTHER INFORMATION Legal Proceedings The company is not currently a party to any pending legal proceedings - The company is not a party to any pending legal proceedings but may become subject to them in the ordinary course of business[204] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022[205] Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the reporting period - None[206] Other Information There is no other information to report for this period - None[207] Exhibits This section lists filed exhibits, including officer certifications and Inline XBRL documents - The report includes a list of filed exhibits, such as officer certifications and XBRL data files[208]