2024 Annual Report on Form 10-K
Neonode Inc. filed its annual report on Form 10-K for the fiscal year ended December 31, 2024. The company reported a market value of voting and non-voting common equity held by non-affiliates of $24,187,310, based on the closing price of its common stock on June 28, 2024. As of March 17, 2025, the company had 16,782,922 shares of common stock outstanding. The report does not provide detailed financial information, but it does indicate that the company is a non-accelerated filer and is not an emerging growth company. The report also notes that the company has not filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act.
Neonode’s Financial Performance: A Detailed Analysis
Overview
Neonode is a provider of advanced optical sensing solutions for touch, contactless touch, and gesture sensing. The company also offers software solutions for machine perception featuring advanced machine learning algorithms. Neonode markets its solutions to customers in various industries, including office equipment, automotive, industrial automation, medical, military, and avionics.
Recent Accounting Pronouncements and Critical Accounting Estimates
Neonode’s consolidated financial statements are prepared in accordance with U.S. GAAP, which requires the company to make certain estimates, judgments, and assumptions. The company has not identified any critical accounting estimates that have had a material impact on its financial condition or results of operations.
Results of Operations
Neonode’s total net revenues were $3.1 million and $3.8 million for the years ended December 31, 2024, and 2023, respectively, representing an 18.8% decrease. This decrease was primarily due to lower revenues from license fees, offset by higher revenues from non-recurring engineering.
The following table presents Neonode’s net revenues distribution by business area and revenue stream:
| Business Area | 2024 | 2023 | ||
|---|---|---|---|---|
| Amount | Percentage | Amount | Percentage | |
| Automotive | $1,219 | 100.0% | $1,579 | 100.0% |
| License fees | $949 | 77.9% | $1,560 | 98.8% |
| Non-recurring engineering | $270 | 22.1% | $19 | 1.2% |
| IT & Industrial | $1,889 | 100.0% | $2,250 | 100.0% |
| License fees | $1,738 | 92.0% | $2,243 | 99.7% |
| Non-recurring engineering | $151 | 8.0% | $7 | 0.3% |
The following table presents Neonode’s disaggregated revenues by revenue stream:
| Revenue Stream | 2024 | 2023 | ||
|---|---|---|---|---|
| Amount | Percentage | Amount | Percentage | |
| Net license revenues from amusement | $150 | 4.8% | $- | -% |
| Net license revenues from automotive | $948 | 30.5% | $1,559 | 40.7% |
| Net license revenues from consumer electronics | $1,589 | 51.2% | $2,244 | 58.6% |
| Net non-recurring engineering services revenues | $421 | 13.5% | $26 | 0.7% |
| Total | $3,108 | 100.0% | $3,829 | 100.0% |
Revenues from license fees decreased by 29.3% in 2024 compared to 2023, mainly due to lower demand for legacy customer products within printer and passenger car touch applications, offset by revenues from new licensing customers. Revenues from non-recurring engineering increased by 1,519.2% in 2024 compared to 2023, primarily attributable to a project with a commercial vehicle OEM customer and a new agreement with NEXTY Electronics.
Gross Margin
Neonode’s gross margin was 96.3% in 2024 compared to 99.7% in 2023. The decrease was due to more non-recurring engineering projects, which have a lower gross margin.
Research and Development (R&D)
R&D expenses decreased by 10.1% in 2024 compared to 2023, primarily due to lower payroll and related costs.
Sales and Marketing
Sales and marketing expenses decreased by 5.2% in 2024 compared to 2023, primarily due to lower personnel and related costs, offset by higher marketing costs.
General and Administrative (G&A)
G&A expenses increased by 15.3% in 2024 compared to 2023, primarily due to higher payroll and related costs and professional fees.
Other Income and Income Taxes
Other income was $0.7 million in both 2024 and 2023, mainly related to interest income. Neonode’s effective tax rate was (0.3)% in 2024 and (2.3)% in 2023, with the company recording valuation allowances for deferred tax assets related to net operating losses due to the uncertainty of realization.
Net Loss
As a result of the factors discussed above, Neonode recorded a net loss of $5.9 million for the year ended December 31, 2024, compared to a net loss of $5.1 million for the year ended December 31, 2023.
Liquidity and Capital Resources
As of December 31, 2024, Neonode had cash and cash equivalents of $16.4 million, compared to $16.2 million as of December 31, 2023. The company’s working capital (current assets less current liabilities) was $16.1 million as of both December 31, 2024, and December 31, 2023.
Net cash used in operating activities for the year ended December 31, 2024, was $5.6 million, primarily due to a net loss of $6.4 million and changes in operating assets and liabilities. Net cash used in operating activities for the year ended December 31, 2023, was $6.3 million.
For the year ended December 31, 2024, Neonode purchased $37,000 of fixed assets, consisting primarily of ERP software, compared to $123,000 of fixed assets, consisting primarily of manufacturing equipment, in 2023.
Net cash provided by financing activities for the year ended December 31, 2024, was $5.8 million, primarily from the issuance of common stock under the Ladenburg ATM Facility. Net cash provided by financing activities for the year ended December 31, 2023, was $7.8 million, primarily from the issuance of common stock under the B. Riley ATM Facility.
Neonode has incurred significant operating losses and negative cash flows from operations since its inception. The company believes it has sufficient cash to meet its obligations for the next twelve months, but may require additional sources of capital in the future to continue operations and implement its strategy. The company’s management believes it could raise capital through public or private offerings if needed.
Contractual Obligations and Off-Balance Sheet Arrangements
Neonode has operating leases for its virtual office in California and office space in Stockholm, Sweden. The company also has a finance lease for soundproof office pods. Neonode has no special purpose or limited purpose entities that provide off-balance sheet financing, liquidity, or market or credit risk support.
Patent Assignment
In 2019, Neonode assigned a portfolio of patents to Aequitas Technologies LLC, an unrelated third party. Aequitas has filed patent infringement lawsuits against Apple, Samsung, and Google related to these patents. The outcomes of these lawsuits are still pending.
Outlook and Analysis
Neonode’s financial performance in 2024 was mixed, with a decrease in total net revenues primarily due to lower license fee revenues, offset by an increase in non-recurring engineering revenues. The company’s gross margin declined due to the higher proportion of lower-margin non-recurring engineering projects.
The company’s R&D and sales and marketing expenses decreased, while G&A expenses increased, resulting in a higher net loss compared to the previous year. Neonode’s liquidity position remains relatively stable, with sufficient cash on hand to fund operations for the next twelve months.
The key challenges facing Neonode include the need to diversify its revenue streams and improve its profitability. The company’s reliance on license fee revenues, which have been declining, highlights the importance of successfully executing its non-recurring engineering projects and expanding its customer base.
Neonode’s patent assignment and the ongoing litigation related to those patents represent both a potential upside and a risk. If the company is successful in the patent infringement lawsuits, it could generate additional revenue. However, the uncertain outcome of these legal proceedings adds uncertainty to Neonode’s financial outlook.
To improve its financial performance, Neonode should focus on the following:
- Diversifying its revenue streams by expanding its non-recurring engineering services and exploring new market opportunities.
- Improving its gross margin by optimizing the mix of license fee and non-recurring engineering revenues.
- Carefully managing its operating expenses, particularly in the areas of R&D and sales and marketing, to enhance profitability.
- Closely monitoring the progress and outcomes of the patent infringement lawsuits and evaluating the potential impact on its financial position.
Overall, Neonode’s financial performance in 2024 was challenging, but the company appears to have a solid liquidity position to weather the current market conditions. However, the company will need to execute its strategic initiatives effectively to return to profitability and drive long-term growth.
