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Organization and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2024
Summary of Significant Accounting Policies [Abstract] |
Organization and Summary of Significant Accounting Policies | 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 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. We adopted ASU 2023-07 for the annual period ended December 31, 2024 using a retrospective method to all periods presented. See Note 12 Segment Information in the accompanying notes to the consolidated financial statements for further detail. Recently Issued Accounting Pronouncements Pending Adoption 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. 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 $(54,000) and $(56,000) during the years ended December 31, 2024 and 2023, 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 $(1,000) and $(5,000) during the years ended December 31, 2024 and 2023, respectively. Liquidity We have incurred significant operating losses and negative cash flows from operations since our inception. The Company incurred net losses for combined continuing and discontinued operations of approximately $6.5 million and $10.1 million for the years ended December 31, 2024 and 2023, respectively, and had an accumulated deficit of approximately $224.1 million and $217.6 million as of December 31, 2024 and 2023, respectively. In addition, operating activities used cash of approximately $5.6 million and $6.3 million for the years ended December 31, 2024 and 2023, 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. 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. During the year ended December 31, 2024, we sold an aggregate of 1,423,441 shares of our common stock under the 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. 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, 2024 was $0.8 million, and did not include any allowances. The accounts receivable balance on our consolidated balance sheet as of December 31, 2023 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, 2024, four of our customers represented approximately 80.9% 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% or more of our revenues during the year ended December 31, 2024 are as follows.
| ● | Seiko Epson – 27.3%
| ● | Alpine Electronics – 20.7%
| ● | Hewlett-Packard Company – 20.4%
| ● | Commercial Vehicle OEM – 11.8%
Customers who accounted for 10% or more of our revenues during the year ended December 31, 2023 are as follows.
| ● | Hewlett-Packard Company – 33.3%
| ● | Seiko Epson – 20.2%
| ● | Alpine Electronics – 18.2%
| ● | LG Electronics – 13.1%
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 and include estimated useful lives. Depreciation on property, plant 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. Stock-Based Compensation Expense We measure the cost of employee services received in exchange for an award of equity instruments, including share options, based on the estimated fair value of the award on the grant date, and recognize the value as compensation expense over the period the employee is required to provide services in exchange for the award, usually the vesting period. We account for equity instruments issued to non-employees at their estimated fair value. When determining stock-based compensation expense involving options and warrants, we determine the estimated fair value of options and warrants using the Black-Scholes option pricing model. 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, 2024 and 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 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, 2024 and 2023, we had no unrecognized tax benefits. 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 in 2024 and 2023. 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 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. 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:
|  | Years ended December 31, |
|  | 2024 |  |  | 2023 |
(in thousands) |  | Amount |  |  | Percentage |  |  | Amount |  |  | Percentage |
North America |  |  |  |  |  |  |  |  |  |  |  |
Net revenues from Automotive |  | $ | - |  |  |  | - | % |  | $ | - |  |  |  | - | %
Net revenues from IT & Industrial |  |  | 763 |  |  |  | 100.0 | % |  |  | 1,455 |  |  |  | 100.0 | %
|  | $ | 763 |  |  |  | 100.0 | % |  | $ | 1,455 |  |  |  | 100.0 | %
Asia Pacific |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues from Automotive |  | $ | 732 |  |  |  | 39.4 | % |  | $ | 1,199 |  |  |  | 60.1 | %
Net revenues from IT & Industrial |  |  | 1,127 |  |  |  | 60.6 | % |  |  | 796 |  |  |  | 39.9 | %
|  | $ | 1,859 |  |  |  | 100.0 | % |  | $ | 1,995 |  |  |  | 100.0 | %
Europe, Middle East and Africa |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net revenues from Automotive |  | $ | 486 |  |  |  | 100.0 | % |  | $ | 379 |  |  |  | 100.0 | %
Net revenues from IT & Industrial |  |  | - |  |  |  | - | % |  |  | - |  |  |  | - | %
|  | $ | 486 |  |  |  | 100.0 | % |  | $ | 379 |  |  |  | 100.0 | %
Contract Balances Timing of revenue recognition may differ from the timing of invoicing 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. The following table presents our accounts receivable, net, contract assets, and contract liabilities:
|  | December 31, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Accounts receivable and unbilled revenues |  | $ | 732 |  |  | $ | 652 |  |  | $ | 1,119 |
Contract assets |  |  | 51 |  |  |  | - |  |  |  | - |
Contract liabilities (deferred revenues) |  |  | - |  |  |  | 2 |  |  |  | 28 |
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, |
(in thousands) |  | 2024 |  |  | 2023 |  |  | 2022 |
Deferred revenues license fees |  | $ | - |  |  | $ | 2 |  |  | $ | 20 |
Deferred revenues non-recurring engineering |  |  | - |  |  |  | - |  |  |  | 8 |
|  | $ | - |  |  | $ | 2 |  |  | $ | 28 |
Deferred revenue were zero as of December 31, 2024. The Company recognized revenues of approximately $2,000 and $25,000, for 2024 and 2023, 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.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
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