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Interim Period Reporting | 9 Months Ended
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Sep. 30, 2020
Interim Period Reporting [Abstract] |
Interim Period Reporting | 1. Interim Period Reporting The accompanying unaudited interim condensed consolidated financial statements include all adjustments consisting of normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations and cash flows for the interim periods presented. The results of operations for the nine months ended September 30, 2020 are not necessarily indicative of results for a full fiscal year or any other period. The accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019 have been prepared by us, pursuant to the rules and regulations of the United States ("U.S.") 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 U.S. ("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, 2019. Operations Neonode Inc., collectively with its subsidiaries is referred to as "Neonode" or the "Company", develops optical touch and gesture control solutions for human interaction with devices and remote sensing solutions for driver monitoring and cabin monitoring features in automotive and other applications. Our operations from January 1, 2020 focused on three different business areas, human machine interface ("HMI") Solutions, HMI Products and Remote Sensing Solutions. In HMI Solutions, Neonode offers customized optical touch and gesture control solutions for many different markets and segments. In HMI Products, the Company provides plug-and-play sensor modules that enable touch on any surface, in-air touch, and gesture control for a wide range of applications. In Remote Sensing Solutions, Neonode offers driver and cabin monitoring solutions for vehicles based on the Company's flexible, scalable and hardware-agnostic software platform. Liquidity We have incurred significant operating losses and negative cash flows from operations since our inception. The Company incurred net losses attributable to Neonode Inc. of approximately $1.6 million and $4.3 million and $1.1 million and $2.9 million for the three and nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of approximately $194.8 million and $190.5 million as of September 30, 2020 and December 31, 2019, respectively. In addition, operating activities used cash of approximately $3.7 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively. On June 17, 2020, the Company entered into short-term loan facilities (the "Loan Agreements") with two entities beneficially owned respectively by each of Ulf Rosberg and Peter Lindell, directors of Neonode (each, a "Director"). Pursuant to the Loan Agreements, each Director made 16,145,000 SEK (Swedish Krona), which is approximately $1.7 million in U.S. dollars, principal amount available to the Company. The Company made an initial drawdown of an aggregate of approximately $1.0 million under the Loan Agreements. On August 5, 2020, the Company entered into a securities purchase agreement (the "Securities Purchase Agreement") with institutional and accredited investors as part of a private placement (the "Private Placement"). On August 6, 2020, in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series C-1 5% Convertible Preferred Stock (the "Series C-1 Preferred Stock") by filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized and unissued preferred stock as Series C-2 5% Convertible Preferred Stock (the "Series C-2 Preferred Stock") by filing a Series C-2 Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of the State of Delaware. The Series C-1 Preferred Stock and Series C-2 Preferred Stock are substantially the same, except the conversion of the Series C-2 Preferred Stock requires additional shareholder approval in accordance with Nasdaq listing rules. On August 7, 2020, Neonode issued 517 shares of Series C-2 Preferred Stock to UMR Invest AB, the entity beneficially owned by Ulf Rosberg, to repay the indebtedness and accrued interest under the Loan Agreement. To effect a similar transaction with entities beneficially owned by the other Director, Peter Lindell, (i) on August 7, 2020, at the closing of the Private Placement, Cidro Förvaltning AB paid for an additional 517 shares of Series C-2 Preferred Stock, and (ii) on August 10, 2020, the next business day after the closing of the Private Placement, Neonode repaid to Cidro Holding AB the debt and accrued interest due under the Loan Agreement, an amount that equaled the price of the 517 shares of Series C-2 Preferred Stock. As a result of the repayments to each Director, the Loan Agreements terminated in accordance with their terms. The closing of the Private Placement occurred on August 7, 2020. Pursuant to the Securities Purchase Agreement, Neonode issued a total of 1,611,845 shares of common stock (the "Common Shares") at a price of $6.50 per Common Share, and a total of 3,415 shares with a conversion price of $6.50 per share and a stated value of $1,000 of Series C-1 Preferred Stock and Series C-2 Preferred Stock, for an aggregate purchase price of $13.9 million in gross proceeds. Ulf Rosberg and Peter Lindell, directors of Neonode, and Urban Forssell the Chief Executive Officer of Neonode purchased an aggregate of $3.1 million of the Series C-2 Preferred Stock pursuant to the Securities Purchase Agreement. The net proceeds of the Private Placement are being used for working capital purposes. Pursuant to their terms and the provisions of the Securities Purchase Agreement, the Series C-1 Preferred Stock and Series C-2 Preferred Stock (together, the "Preferred Shares") were converted into 684,378 shares of Neonode common stock. The holders of the Preferred Shares were entitled to receive dividends at the rate per share of 5% per annum, totaling $33,000. As of September 30, 2020, $2,000 of preferred dividends had been paid and $31,000 was accrued. In connection with the Securities Purchase Agreement, Neonode entered into a Registration Rights Agreement (the "Registration Rights Agreement") pursuant to which Neonode filed a registration statement with the Securities and Exchange Commission (the "SEC") relating to the offer and sale by the holders of the Common Shares, and the shares of common stock that were underlying the Preferred Shares. Pursuant to the Registration Rights Agreement, Neonode was obligated to file the registration statement within 30 calendar days and to use reasonable best efforts to cause the registration statement to be declared effective within 75 calendar days. The registration statement was declared effective by the SEC on September 18, 2020. Failure to maintain the effective registration of the Common Shares and the shares of common stock underlying the Preferred Shares will subject Neonode to payment for liquidated damages. In connection with the Private Placement, Neonode incurred total offering costs of $879,000. The condensed consolidated financial statements included herein have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment of liabilities in the ordinary course of business. Management evaluated the significance of the Company's operating loss and determined that the Company's cash position after the Private Placement, current operating plan and sources of potential capital would be sufficient to alleviate concerns about the Company's ability to continue as a going concern. We expect our revenues from our three business areas will enable us to reduce our operating losses in coming years. In addition, we intend to continue to implement various measures to improve our operational efficiencies. No assurances can be given that management will be successful in meeting its revenue targets and reducing its operating loss. In the future, we may require sources of capital in addition to cash on hand to continue operations and to implement our strategy. If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements. No assurances can be given that we will be successful in obtaining such additional financing on reasonable terms, or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, results of operations and financial condition. In addition, if funds are available, the issuance of equity securities or securities convertible into equity could dilute the value of shares of our common stock and cause the market price to fall, and the issuance of debt securities could impose restrictive covenants that could impair our ability to engage in certain business transactions.

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