| Summary of Significant Accounting policies | 2. 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 June 30, 2024 and December 31, 2023 and the condensed consolidated statements of operations, comprehensive loss, stockholders’
equity and cash flows for the three and six months ended June 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 gains (losses) were ($32,000) and ($66,000) and $(141,000) and $(106,000) during
the three and six months ended June 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 $2,000
during the three and six months ended June 30, 2024, respectively, compared to $0 and $(5,000) 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 June 30, 2024, six of
our customers represented approximately 82.0% of our consolidated accounts receivable and unbilled revenues. As of December 31, 2023, four
of our customers represented approximately 76.4% 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 June 30, 2024 are as follows: ● Seiko Epson – 14.3% ● Commercial Vehicle OEM – 13.9% ● Alps Alpine – 13.0% ● Propoint – 11.5% Customers who accounted for
10.0% or more of our net revenues during the six months ended June 30, 2024 are as follows: ● Hewlett-Packard Company – 15.9% ● Alps Alpine – 15.3% ● Seiko Epson – 14.9% Customers who accounted for
10.0% or more of our net revenues during the three months ended June 30, 2023 are as follows: ● Hewlett-Packard Company – 37.4% ● Alps Alpine – 15.3% ● Seiko Epson – 13.7% ● LG – 12.5% Customers who accounted for
10.0% or more of our net revenues during the six months ended June 30, 2023 are as follows: ● Hewlett-Packard Company – 34.0% ● Seiko Epson – 17.0% ● Alps Alpine – 15.0% ● LG – 13.1% Revenues The following tables present
the net revenues distribution by geographical area and market for the three and six months ended June 30, 2024 and 2023 (dollars in thousands):
Three months ended Three months ended
Amount Percentage Amount Percentage
North America
Net revenues from Automotive $ - - % $ - - %
Net revenues from IT & Industrial 248 100.0 % 566 100.0 %
$ 248 100.0 % $ 566 100.0 %
Asia Pacific
Net revenues from Automotive $ 206 26.1 % $ 332 63.6 %
Net revenues from IT & Industrial 584 73.9 % 190 36.4 %
$ 790 100.0 % $ 522 100.0 %
Europe, Middle East and Africa
Net revenues from Automotive $ 221 57.3 % $ 112 100.0 %
Net revenues from IT & Industrial 165 42.7 % - - %
$ 386 100.0 % $ 112 100.0 %
Six months ended Six months ended
Amount Percentage Amount Percentage
North America
Net revenues from Automotive $ - - % $ - - %
Net revenues from IT & Industrial 586 100.0 % 1,037 100.0 %
$ 586 100.0 % $ 1,037 100.0 %
Asia Pacific
Net revenues from Automotive $ 454 35.7 % $ 689 59.6 %
Net revenues from IT & Industrial 816 64.3 % 467 40.4 %
$ 1,270 100.0 % $ 1,156 100.0 %
Europe, Middle East and Africa
Net revenues from Automotive $ 310 53.3 % $ 201 77.3 %
Net revenues from IT & Industrial 272 46.7 % 59 22.7 %
$ 582 100.0 % $ 260 100.0 % Product Warranty The following table summarizes
the activity related to the product warranty liability (in thousands):
June 30, December 31,
Balance at beginning of period $ 30 $ 49
Provisions for (adjustments to) warranty issued 31 (19 )
Balance at end of period $ 61 $ 30 The Company accrues for warranty
costs as part of its cost of sales of TSMs based on estimated costs. The Company’s products are generally covered by a warranty
for a period of 12 months from the customer receipt of the product included as a component of accrued expenses on the condensed consolidated
balance sheet. Contract Liabilities The following table presents
our deferred revenues by source (in thousands):
June 30, December 31,
Deferred revenues license fees $ 50 $ 2
Deferred revenues products 1 8
Deferred revenues non-recurring engineering - -
$ 51 $ 10 During the three and six
months ended June 30, 2024, the Company recognized revenues of approximately $7,000 and $10,000, respectively, related to contract liabilities
outstanding at the beginning of the year. During the three and six months ended June 30, 2023, the Company recognized revenues of approximately
$9,000 and 14,000, respectively, related to contract liabilities outstanding at the beginning of the year. 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 June 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 June 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 six months ended June
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 six months ended
June 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 In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures |
