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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting policies

3. Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Neonode Inc. and its intercompany subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheets at September 30, 2024 and December 31, 2023 and the condensed consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three and nine months ended September 30, 2024 and 2023 include our accounts and those of our intercompany subsidiaries.

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 $(30,000) and $(96,000) and $(48,000) and $(154,000) during the three and nine months ended September 30, 2024 and 2023, respectively. Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and were $(3,000) and $(1,000) during the three and nine months ended September 30, 2024, respectively, compared to $7,000 and $2,000 during the same periods in 2023, respectively.

Concentration of Credit and Business Risks

Our customers are located in the United States, Europe, Oceania and Asia.

As of September 30, 2024, five of our customers represented approximately 94.8% of our consolidated accounts receivable and unbilled revenues.

As of December 31, 2023, three of our customers represented approximately 77.8% 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 September 30, 2024 are as follows:

	●	Seiko Epson – 30.6%

	●	Nexty Electronics – 17.9%

	●	Alps Alpine – 15.3%

	●	Hewlett-Packard Company – 14.6%

	●	Commercial Vehicle OEM – 12.35%

Customers who accounted for 10.0% or more of our net revenues during the nine months ended September 30, 2024 are as follows:

	●	Seiko Epson – 25.2%

	●	Hewlett-Packard Company – 20.7%

	●	Alps Alpine – 20.4%

	●	Commercial Vehicle OEM – 13.4%

Customers who accounted for 10.0% or more of our net revenues during the three months ended September 30, 2023 are as follows:

	●	Seiko Epson – 25.5%

	●	Hewlett-Packard Company – 24.8%

	●	Alps Alpine – 19.5%

	●	LG – 13.6%

	●	Automotive Tier-1 – 11.1%

Customers who accounted for 10.0% or more of our net revenues during the nine months ended September 30, 2023 are as follows:

	●	Hewlett-Packard Company – 33.5%

	●	Seiko Epson – 20.3%

	●	Alps Alpine – 17.1%

	●	LG – 14.0%

Revenues

The following tables present the net revenues distribution by geographical area and market for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

	Three months ended September 30, 2024					Three months ended September 30, 2023
	Amount		Percentage			Amount		Percentage
North America
Net revenues from Automotive	$	-		-	%	$	-		-	%
Net revenues from IT & Industrial		163		100.0	%		247		100.0	%
	$	163		100.0	%	$	247		100.0	%

Asia Pacific
Net revenues from Automotive	$	143		25.9	%	$	279		55.7	%
Net revenues from IT & Industrial		409		74.1	%		222		44.3	%
	$	552		100.0	%	$	501		100.0	%

Europe, Middle East and Africa
Net revenues from Automotive	$	123		100.0	%	$	92		100.0	%
Net revenues from IT & Industrial		-		-	%		-		-	%
	$	123		100.0	%	$	92		100.0	%

	Nine months ended September 30, 2024					Nine months ended September 30, 2023
	Amount		Percentage			Amount		Percentage
North America
Net revenues from Automotive	$	-		-	%	$	-		-	%
Net revenues from IT & Industrial		589		100.0	%		1,202		100.0	%
	$	589		100.0	%	$	1,202		100.0	%

Asia Pacific
Net revenues from Automotive	$	597		43.2	%	$	968		59.8	%
Net revenues from IT & Industrial		834		56.8	%		652		40.2	%
	$	1,431		100.0	%	$	1,620		100.0	%

Europe, Middle East and Africa
Net revenues from Automotive	$	433		100.0	%	$	285		100.0	%
Net revenues from IT & Industrial		-		-	%		-		-	%
	$	433		100.0	%	$	285		100.0	%

Contract Liabilities

The following table presents our deferred revenues by source (in thousands):

	September 30, 2024		December 31, 2023
Deferred revenues license fees	$	25	$	2
Deferred revenues non-recurring engineering		-		-
	$	25	$	2

During the three and nine months ended September 30, 2024, the Company recognized revenues of approximately $25,000 and $2,000, respectively, related to contract liabilities outstanding at the beginning of the period. During the three and nine months ended September 30, 2023, the Company recognized revenues of approximately $7,000 and 17,000, 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 September 30, 2024 and December 31, 2023. 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 September 30, 2024 and December 31, 2023, we had no unrecognized tax benefits.

Net Loss per Share

Net loss per share amounts have been computed based on the weighted average number of shares of common stock outstanding during the three and nine months ended September 30, 2024 and 2023. Net loss per share, assuming dilution amounts from common stock equivalents, is computed based on the weighted-average number of shares of common stock and potential common stock equivalents outstanding during the period. The weighted-average number of shares of common stock and potential common stock equivalents used in computing the net loss per share for the three and nine months ended September 30, 2024 and 2023 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 6).

Recent Accounting Pronouncements

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. This guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, 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.