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.
Overview
Neonode is a company that provides advanced optical sensing solutions for touch, contactless touch, and gesture sensing. They also provide software solutions for machine perception that use advanced machine learning algorithms to detect and track people and objects in video streams. Neonode’s products and solutions are based on their zForce and MultiSensing technology platforms, and they market and sell their solutions to customers in various industries including office equipment, automotive, industrial automation, medical, military, and avionics.
Recent Accounting Pronouncements
The information regarding recent accounting pronouncements is incorporated by reference from Note 1 to the consolidated financial statements.
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 that can affect the reported amounts of assets, liabilities, revenues, and expenses. Neonode has not identified any critical accounting estimates.
Results of Operations
The following table provides Neonode’s consolidated results for the continuing operations:
| (in thousands) | 2024 | 2023 | Variance in Dollars | Variance in Percent |
|---|---|---|---|---|
| Revenues: | ||||
| License fees | $2,687 | $3,803 | $(1,116) | (29.3)% |
| Percentage of revenue | 86.5% | 99.3% | ||
| Non-recurring engineering | $421 | $26 | $395 | 1,519.2% |
| Percentage of revenue | 13.5% | 0.7% | ||
| Total revenues | $3,108 | $3,829 | $(721) | (18.8)% |
| Cost of revenues: | ||||
| Non-recurring engineering | $116 | $12 | $104 | 866.7% |
| Percentage of revenue | 3.7% | 0.3% | ||
| Total cost of revenues | $116 | $12 | $104 | 866.7% |
| Gross margin | $2,992 | $3,817 | $(825) | (21.6)% |
| Operating expenses: | ||||
| Research and development | $3,444 | $3,833 | $(389) | (10.1)% |
| Percentage of revenue | 110.8% | 100.1% | ||
| Sales and marketing | $2,328 | $2,455 | $(127) | (5.2)% |
| Percentage of revenue | 74.9% | 64.1% | ||
| General and administrative | $3,767 | $3,266 | $501 | 15.3% |
| Percentage of revenue | 121.2% | 85.3% | ||
| Total operating expenses | $9,539 | $9,554 | $(15) | (0.2)% |
| Percentage of revenue | 306.9% | 249.5% | ||
| Operating loss | $(6,547) | $(5,737) | $(810) | 14.1% |
| Percentage of revenue | (210.6)% | (149.8)% | ||
| Other income - net | $687 | $736 | $(49) | (6.7)% |
| Percentage of revenue | 22.1% | 19.2% | ||
| Provision for income taxes | $15 | $115 | $(100) | (87.0)% |
| Percentage of revenue | 0.5% | 3.0% | ||
| Loss from continuing operations | $(5,875) | $(5,116) | $(759) | 14.8% |
| Percentage of revenue | (189.0)% | (133.6)% | ||
| Loss per share from continuing operations | $(0.37) | $(0.33) | $(0.04) | 12.1% |
Revenues
All of Neonode’s sales for 2024 and 2023 were to customers located in the United States, Europe, and Asia. Total net revenues were $3.1 million and $3.8 million for 2024 and 2023, respectively, a decrease of 18.8% due to lower license revenues, partially offset by higher non-recurring engineering revenues.
The following table presents the net revenues distribution by business area and revenue stream:
| (in thousands) | 2024 | | 2023 | | | | Amount | Percentage | Amount | Percentage | | Automotive | | | | | | License fees | $949 | 77.9% | $1,560 | 98.8% | | Non-recurring engineering | $270 | 22.1% | $19 | 1.2% | | | $1,219 | 100.0% | $1,579 | 100.0% | | IT & Industrial | | | | | | License fees | $1,738 | 92.0% | $2,243 | 99.7% | | Non-recurring engineering | $151 | 8.0% | $7 | 0.3% | | | $1,889 | 100.0% | $2,250 | 100.0% |
The following table presents disaggregated revenues by revenue stream:
| (in thousands) | 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% | | | $3,108 | 100.0% | $3,829 | 100.0% |
Revenues from license fees decreased by 29.3% in 2024 compared to 2023 due to lower demand for legacy products, partially offset by revenues from new licensing customers. Revenues from non-recurring engineering increased by 1,519.2% in 2024 compared to 2023 due to a new 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, with the decrease due to more non-recurring engineering projects.
Research and Development
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, partially offset by higher marketing costs.
General and Administrative
General and administrative expenses increased by 15.3% in 2024 compared to 2023, primarily due to higher payroll and related costs and professional fees.
Other Income
Other income was $0.7 million in both 2024 and 2023, mainly related to interest income.
Income Taxes
Neonode’s effective tax rate was (0.3)% in 2024 and (2.3)% in 2023, with valuation allowances recorded for deferred tax assets related to net operating losses due to uncertainty of realization.
Net Loss
Neonode recorded a net loss of $5.9 million in 2024 compared to a net loss of $5.1 million in 2023.
Liquidity and Capital Resources
As of December 31, 2024, Neonode had $16.4 million in cash and cash equivalents, and working capital of $16.1 million. The company believes it has sufficient capital to fund operations for the next 12 months.
Neonode has incurred significant operating losses and negative cash flows from operations since inception. The company may require additional sources of capital in the future to continue operations and implement its strategy, such as equity investments or debt arrangements. Neonode’s foreign subsidiaries are also subject to foreign currency exchange rate risk.
Contractual Obligations and Off-Balance Sheet Arrangements
Neonode has operating leases for office space but no other significant contractual obligations or off-balance sheet arrangements.
Patent Assignment
In 2019, Neonode assigned a portfolio of patents to Aequitas Technologies LLC, an unrelated third party, with the right to share in potential net proceeds from a licensing and monetization program. Aequitas has filed patent infringement lawsuits against Apple, Samsung, and Google, with mixed results so far.
In summary, Neonode’s financial performance in 2024 was characterized by a decrease in total revenues, a decline in gross margin, and a higher net loss compared to 2023. The company has sufficient liquidity to fund operations in the near term but may need to seek additional capital in the future to support its ongoing business and strategic initiatives.
