NEONODE INC., 10-K filed on 11 Mar 20
v3.20.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Mar. 02, 2020
Jun. 30, 2019
Document and Entity Information [Abstract]      
Entity Registrant Name Neonode Inc.    
Entity Central Index Key 0000087050    
Amendment Flag false    
Current Fiscal Year End Date --12-31    
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Filer Category Non-accelerated Filer    
Entity Current Reporting Status Yes    
Entity Small Business true    
Entity Shell Company false    
Entity Emerging Growth Company false    
Entity Common Stock, Shares Outstanding   9,171,154  
Entity Filer Number 1-35526    
Entity Interactive Data Current Yes    
Entity Incorporation State Country Code DE    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Public Float     $ 11,881,870
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash $ 2,357 $ 6,555
Accounts receivable and unbilled revenues, net 1,324 1,830
Projects in process 8
Inventory 1,030 1,219
Prepaid expenses and other current assets 715 890
Total current assets 5,434 10,494
Investment in joint venture 3 3
Property and equipment, net 1,583 2,484
Operating lease right-of-use assets 416
Other assets 261
Total assets 7,436 13,242
Current liabilities:    
Accounts payable 555 501
Accrued payroll and employee benefits 960 902
Accrued expenses 541 265
Deferred revenues 67 75
Current portion of finance lease obligations 568 570
Current portion of operating lease obligations 332
Total current liabilities 3,023 2,313
Finance lease obligations, net of current portion 508 1,133
Operating lease obligations, net of current portion 58
Total liabilities 3,589 3,446
Commitments and contingencies
Stockholders' equity    
Series B Preferred stock, 54,425 shares authorized with par value of $0.001; 0 and 82 shares issued and outstanding at December 31, 2019 and 2018, respectively. (In the event of dissolution, each share of Series B Preferred stock has a liquidation preference equal to par value of $0.001 over the shares of common stock)
Common stock, 15,000,000 shares authorized, with par value of $0.001; 9,171,154 and 8,800,313 shares issued and outstanding at December 31, 2019 and 2018, respectively 9 9
Additional paid-in capital 197,543 197,507
Accumulated other comprehensive loss (639) (456)
Accumulated deficit (190,520) (185,222)
Total Neonode Inc. stockholders' equity 6,393 11,838
Noncontrolling interests (2,546) (2,042)
Total stockholders' equity 3,847 9,796
Total liabilities and stockholders' equity $ 7,436 $ 13,242
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 15,000,000 15,000,000
Common stock, shares issued 9,171,154 8,800,313
Common stock, shares outstanding 9,171,154 8,800,313
Series B Preferred Stock    
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 54,425 54,425
Preferred stock, shares issued 0 82
Preferred stock, shares outstanding 0 82
Preferred stock, liquidation preference $ 0.001 $ 0.001
v3.20.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Revenues:    
License fees $ 5,966 $ 7,954
Sensor modules 560 227
Non-recurring engineering 120 357
Total revenues 6,646 8,538
Cost of revenues:    
Sensor modules 499 638
Non-recurring engineering 184 283
Total cost of revenues 683 921
Total gross margin 5,963 7,617
Operating expenses:    
Research and development 5,239 5,278
Sales and marketing 2,158 1,995
General and administrative 4,296 4,221
Total operating expenses 11,693 11,494
Operating loss (5,730) (3,877)
Other expense    
Interest expense (34) (49)
Other expense (3)
Total other expense (34) (52)
Loss before provision for income taxes (5,764) (3,929)
Provision for income taxes 38 13
Net loss including noncontrolling interests (5,802) (3,942)
Less: net loss attributable to noncontrolling interests 504 882
Net loss attributable to Neonode Inc. $ (5,298) $ (3,060)
Loss per common share:    
Basic and diluted loss per share $ (0.60) $ (0.52)
Basic and diluted - weighted average number of common shares outstanding 8,844 5,884
v3.20.1
Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Statement of Comprehensive Income [Abstract]    
Net loss including noncontrolling interests $ (5,802) $ (3,942)
Other comprehensive income (loss):    
Foreign currency translation adjustments (183) (357)
Comprehensive loss (5,985) (4,299)
Less: Comprehensive loss attributable to noncontrolling interests 504 882
Comprehensive loss attributable to Neonode Inc. $ (5,481) $ (3,417)
v3.20.1
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Series B Preferred Stock
Common Stock
Additional Paid-in Capital
Accumulated Other Comprehensive Income (Loss)
Accumulated Deficit
Total Neonode Inc. Stockholders' Equity
Noncontrolling Interests
Total
Balances at Dec. 31, 2017 $ 6 $ 192,861 $ (99) $ (183,745) $ 9,023 $ (1,160) $ 7,863
Balances, shares at Dec. 31, 2017 83 5,859            
Stock option compensation expense to employees and directors     29     29   29
Conversion of series B Preferred Stock to Common Stock
Conversion of series B Preferred Stock to Common Stock, shares (1)              
Proceeds from sale of common stock, net of offering costs $ 3 4,617 4,620   4,620
Proceeds from sale of common stock, net of offering costs, shares 2,941            
Adjustment related to adoption of ASC 606 revenue recognition 1,583 1,583 1,583
Foreign currency translation adjustment (357) (357) (357)
Net loss (3,060) (3,060) (882) (3,942)
Balances at Dec. 31, 2018 $ 9 197,507 (456) (185,222) 11,838 (2,042) 9,796
Balances, shares at Dec. 31, 2018 82 8,800            
Conversion of series B Preferred Stock to Common Stock, shares (82) 11            
Common stock issued upon excersise of common stock warrants   $ 360 36     36   36
Foreign currency translation adjustment       (183) (183) (183)
Net loss         (5,298) (5,298) (504) (5,802)
Balances at Dec. 31, 2019 $ 9 $ 197,543 $ (639) $ (190,520) $ 6,393 $ (2,546) $ 3,847
Balances, shares at Dec. 31, 2019 9,171            
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:    
Net loss (including noncontrolling interests) $ (5,802) $ (3,942)
Adjustments to reconcile net loss to net cash used in operating activities:    
Stock-based compensation expense 29
Bad debt expense 105
Write-off of prepaids 414
Depreciation and amortization 855 1,008
Amortization of operating lease right-of-use assets 404
Loss on disposal of property and equipment 6
Changes in operating assets and liabilities:    
Accounts receivable 397 481
Projects in process (8) 1
Inventory 124 (142)
Prepaid expenses and other current assets (19) 556
Accounts payable and accrued expenses 454 41
Deferred revenues (429) (897)
Operating lease obligations (12)
Net cash used in operating activities (3,517) (2,859)
Cash flows from investing activities:    
Purchase of property and equipment (89) (236)
Proceeds from sale of property and equipment 4
Net cash used in investing activities (89) (232)
Cash flow from financing activities:    
Proceeds from issuance of common stock and warrants, net of offering costs 36 4,620
Principal payments on finance lease obligations (535) (551)
Net cash (used in) provided by financing activities (499) 4,069
Effect of exchange rate changes on cash (93) (219)
Net change in cash (4,198) 759
Cash at beginning of year 6,555 5,796
Cash at end of year 2,357 6,555
Supplemental disclosure of cash flow information:    
Cash paid for interest 34 49
Cash paid for income taxes 38 13
Supplemental disclosure of non-cash investing and financing activities:    
Purchase of equipment with finance lease obligations $ 169
v3.20.1
Nature of the Business and Operations
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of the Business and Operations
1. Nature of the Business and Operations

 

Background and Organization

 

Neonode Inc. ("we", "us", "our", or the "Company") was incorporated in the State of Delaware in 1997 as the parent of Neonode AB, a company founded in February 2004 and incorporated in Sweden. On December 29, 2008, we entered into a share exchange agreement with AB Cypressen nr 9683 (renamed Neonode Technologies AB), a Swedish engineering company, and Neonode Technologies AB became our wholly owned subsidiary. In 2013, we established additional wholly owned subsidiaries: Neonode Japan Inc. (Japan); Neno User Interface Solutions AB (Sweden) (sold December 27, 2018); NEON Technology Inc. (U.S.) (dissolved November 19, 2018); and Neonode Americas Inc. (U.S.) (dissolved November 19, 2018). In 2014, we established one additional wholly owned subsidiary: Neonode Korea Ltd. (South Korea). In 2015, we established one additional wholly owned subsidiary: Neonode Taiwan Ltd. (Taiwan). In 2015, we established Pronode Technologies AB, a majority-owned subsidiary of Neonode Technologies AB. In 2016, we entered into a joint venture, named Neoeye AB, between SMART EYE AB and our subsidiary Neonode Technologies AB.

 

Operations

 

Neonode Inc., collectively with its subsidiaries is referred to as "Neonode", develops optical touch and gesture control solutions for human interaction with devices ("HMI") and remote sensing solutions for driver monitoring and cabin monitoring features in automotive and other applications.

 

Neonode's main business model is to license the technology to Original Equipment Manufacturers ("OEMs") and Tier 1 system suppliers who embed the technology into systems and products they develop, manufacture and sell.

 

In addition, Neonode designs and manufactures sensor modules that incorporate our zForce AIR technology and sells the embedded sensors to OEMs, Original Design Manufacturers ("ODMs") and Tier 1 suppliers for use in their systems and products. Neonode began shipping sensor modules in October 2017.

 

Neonode also manufactures and sells through distributors, a Neonode branded AirBar product that incorporates one of the sensor modules.

 

Liquidity

 

We incurred net losses of approximately $5.3 million and $3.1 million for the years ended December 31, 2019 and 2018, respectively, and had an accumulated deficit of approximately $190.5 million as of December 31, 2019. In addition, we used cash in operating activities of approximately $3.5 million and $2.9 million for the years ended December 31, 2019 and 2018, respectively.

 

In March 2017, we filed a $20 million shelf registration statement with the SEC that became effective on March 24, 2017. Subject to the availability of sufficient shares of authorized common stock, we may from time to time issue shares of our common stock under our shelf registration in amounts, at prices, and on terms to be announced when and if the securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in a prospectus supplement and any other offering materials, at the time of the offering. Our shelf registration statement will expire on March 24, 2020.

  

December 2018 Private Placement

 

On December 28, 2018, we entered into a Securities Purchase Agreement with foreign investors as part of a non-brokered private placement pursuant to which we issued a total of 2,940,767 shares of common stock at $1.60 per share for net proceeds of $4.6 million. The common stock issued in the private placement is not registered for resale and we are not required under the Securities Purchase Agreement to register the issued stock for resale. The purchasers in the private placement included Neonode directors, Ulf Rosberg and Andreas Bunge, and members of management and certain employees of the Company, including the former Chief Executive Officer, Hakan Persson, and the former Chief Financial Officer, Lars Lindqvist. The Neonode directors and members of management and employees individually purchased an aggregate of approximately $2 million of common stock as part of the private placement.  In addition, major shareholder and now director, Peter Lindell, also purchased shares.  Mr. Lindell and Mr. Rosberg are each a beneficial owner of approximately 18% of Neonode common stock.

  

The consolidated financial statements included herein 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 evaluated the significance of the Company's operating loss and determined that the Company's current operating plan and sources of capital would be sufficient to alleviate concerns about the Company's ability to continue as a going concern.

 

We expect our revenues from license fees, sensor modules, non-recurring engineering fees and AirBar sales will enable us to reduce our operating losses in coming years. In addition, we intend to continue to implement various measures to improve our operational efficiencies. No assurances can be given that management will be successful in meeting its revenue targets and reducing its operating loss.

 

In the future, we may require sources of capital in addition to cash on hand to continue operations and to implement our strategy. If our operations do not become cash flow positive, we may be forced to seek equity investments or debt arrangements. No assurances can be given that we will be successful in obtaining such additional financing on reasonable terms, or at all. If adequate funds are not available on acceptable terms, or at all, we may be unable to adequately fund our business plans and it could have a negative effect on our business, results of operations and financial condition. In addition, if funds are available, the issuance of equity securities or securities convertible into equity could dilute the value of shares of our common stock and cause the market price to fall, and the issuance of debt securities could impose restrictive covenants that could impair our ability to engage in certain business transactions.

v3.20.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
2. Summary of Significant Accounting policies

 

Principles of Consolidation

 

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, as well as Pronode Technologies AB, a 51% majority owned subsidiary of Neonode Technologies AB. The remaining 49% of Pronode Technologies AB is owned by Propoint AB, located in Gothenburg, Sweden. Pronode Technologies AB was organized to sell engineering services within the automotive markets. All inter-company accounts and transactions have been eliminated in consolidation.

 

Neonode consolidates entities in which it has a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights.

 

The consolidated balance sheets at December 31, 2019 and 2018 and the consolidated statements of operations, comprehensive loss, stockholders equity and cash flows for the years ended 2019 and 2018 include our accounts and those of our wholly owned subsidiaries as well as Pronode Technologies AB.

 

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. Actual results could differ from these estimates and judgments.

 

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; measuring variable consideration and other obligations such as product returns and refunds, and product warranties; provisions for uncollectible receivables; determining the net realizable value of inventory; recoverability of capitalized project costs and long-lived asset; 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. 

 

Cash and Cash Equivalents

 

We have not had any liquid investments other than normal cash deposits with bank institutions to date. The Company considers all highly liquid investments with original maturities of three months of less to be cash equivalents.

 

Concentration of Cash Balance Risks

 

Cash balances are maintained at various banks in the U.S., Japan, Korea, Taiwan and Sweden. For deposits held with financial institutions in the U.S., the U.S. Federal Deposit Insurance Corporation, provides basic deposit coverage with limits up to $250,000 per owner. The Swedish government provides insurance coverage up to 100,000 Euro per customer and covers deposits in all types of accounts. The Japanese government provides insurance coverage up to 10,000,000 Yen per customer. The Korea Deposit Insurance Corporation provides insurance coverage up to 50,000,000 Won per customer. The Central Deposit Insurance Corporation in Taiwan provides insurance coverage up to 3,000,000 Taiwan Dollar per customer. At times, deposits held with financial institutions may exceed the amount of insurance provided.

 

Accounts Receivable and Allowance for Doubtful Accounts  

 

Accounts receivable is stated at net realizable value. Our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make required payments. Credit limits are established through a process of reviewing the financial history and stability of each customer. Should all efforts fail to recover the related receivable, we will write off the account. We also record an allowance for all customers based on certain other factors including the length of time the receivables are past due and historical collection experience with customers. Our allowance for doubtful accounts was approximately $85,000 and $149,000 as of December 31, 2019 and 2018, respectively.

 

Projects in Process

 

Projects in process consist of costs incurred toward the completion of various projects for certain customers. These costs are primarily comprised of direct engineering labor costs and project-specific equipment costs. These costs are capitalized on our balance sheet as an asset and deferred until revenue for each project is recognized in accordance with our revenue recognition policy. Costs capitalized in projects in process were $8,000 as of December 31, 2019. There were no costs capitalized in projects in process as of December 31, 2018.

 

Inventory

 

Inventory is stated at the lower of cost and net realizable value, using the first-in, first-out (“FIFO”) valuation method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

 

Due to the low sell-through of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well as AirBar related raw materials. Management has further decided to reserve for a portion of AirBar finished goods, depending on type of AirBar and in which location it is stored. The AirBar inventory reserve was $0.8 million and $1.0 million for the years ended December 31, 2019 and 2018, respectively.

 

In order to protect our manufacturing partners from losses in relation to AirBar production, we agreed to secure the value of the inventory with a bank guarantee. Since the sale of AirBars has been lower than expected, a major part of the inventory at the partner remained unused when the due date of the bank guarantee neared and Neonode therefore agreed that the partner should keep inventory for the production of 20,000 AirBars and the rest be purchased by us. The inventory value of these purchases has been fully reserved.

 

As of December 31, 2019, the Company’s inventory consists primarily of components that will be used in the manufacturing of our sensor modules. We segregate inventory for reporting purposes by raw materials, work-in-process, and finished goods.

 

Raw materials, work-in-process, and finished goods are as follows (in thousands):

 

   December 31,   December 31, 
   2019   2018 
Raw materials  $396   $246 
Work-in-process   186    220 
Finished goods   448    753 
Ending inventory  $1,030   $1,219 

 

Investment in Joint Venture

 

We invested $3,000 for a 50% interest in Neoeye AB. We account for our investment using the equity method of accounting since the investment provides us the ability to exercise significant influence, but not control, over the investee. We are not required to guarantee any obligations of the joint venture. There have been no operations of Neoeye through December 31, 2019.

 

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method based upon estimated useful lives of the assets as follows:

 

    Estimated useful lives
     
Computer equipment   3 years
Furniture and fixtures   5 years
Equipment   7 years

 

Equipment purchased under a finance lease is depreciated over the term of the lease, if that lease term is shorter than the estimated useful life.

 

Upon retirement or sale of property and equipment, cost and accumulated depreciation and amortization are removed from the accounts and any gains or losses are reflected in the consolidated statement of operations. Maintenance and repairs are charged to expense as incurred.

 

Right-of-Use Assets

 

A right-of-use asset represents a lessee’s right to use a leased asset for the term of the lease. Our right-of-use assets generally consist of operating leases for buildings.

 

Right-of-use assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs, such as commissions paid to obtain a lease.

 

Right-of-use assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct costs not yet expensed.

 

Long-Lived Assets

 

We assess any impairment by estimating the future cash flow from the associated asset in accordance with relevant accounting guidance. If the estimated undiscounted future cash flow related to these assets decreases or the useful life is shorter than originally estimated, we may incur charges for impairment of these assets. As of December 31, 2019, we believe there was no impairment of our long-lived assets. There can be no assurance, however, that market conditions will not change or sufficient demand for our products and services will continue, which could result in impairment of long-lived assets in the future.

 

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 or the Taiwan Dollar 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). Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations and were $105,000 and $(58,000) during the years ended December 31, 2019 and 2018, respectively. Foreign currency translation gains or (losses) were $(183,000) and $(357,000) during the years ended December 31, 2019 and 2018, respectively.

 

Concentration of Credit and Business Risks

 

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

 

As of December 31, 2019, three customers represented approximately 72% of our consolidated accounts receivable and unbilled revenues.

 

As of December 31, 2018, four customers represented approximately 67% of our consolidated accounts receivable and unbilled revenues.

 

Customers who accounted for 10% or more of our net revenues during the year ended December 31, 2019 are as follows.

 

  Hewlett-Packard Company – 38%
     
  Epson – 16%
     
  Alpine – 15%

 

Customers who accounted for 10% or more of our net revenues during the year ended December 31, 2018 are as follows.

 

  Hewlett-Packard Company – 35%
     
  Epson – 14%
     
  Canon – 12%

 

The Company conducts business in the United States, Europe and Asia. At December 31, 2019, the Company maintained approximately $2,637,000, $1,148,000 and $62,000 of its net assets in the United States, Europe and Asia, respectively. At December 31, 2018, the Company maintained approximately $2,537,000, $7,187,000 and $72,000 of its net assets in the United States, Europe and Asia, respectively.

 

 Revenue Recognition

 

We recognize revenue when control of products is transferred to our customers, and when services are completed and accepted by our customers; the amount of revenue we recognize reflects the consideration we expect to receive for those products or services. Our contracts with customers may include combinations of products and services, for example, a contract that includes products and related engineering services. We structure our contracts such that distinct performance obligations, such as product sales or license fees, and related engineering services, are clearly defined in each contract.

 

License fees for products and sales of AirBar and sensor modules are on a per-unit basis; therefore, we generally satisfy performance obligations as units are shipped to our customers. Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by our customers.

 

We recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. We treat all product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise to transfer goods, therefore we treat all shipping and handling charges as expenses.

 

Licensing Revenues:

 

We earn revenue from licensing our internally developed intellectual property (“IP”). 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 license fees relating to our IP, 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. At the end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make accurate estimates of those royalties.

 

Explicit return rights are not offered to customers. There have been no returns through December 31, 2019.

 

Engineering Services:

 

For technology license or sensor module contracts that require modification or customization of the underlying technology to adapt that technology to customer use, we determine whether the technology license or sensor module, and 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 generally charge an hourly rate for engineering services, and we recognize revenue as engineering services specified in contracts are completed and accepted by our customers. Any upfront payments we receive for future non-recurring engineering services are recorded as unearned revenue until that revenue is earned.

  

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.

 

Revenues from engineering services contracts that are short-term in nature are recorded when those services are complete and accepted by customers.

 

Revenues from engineering services contracts with substantive defined deliverables for which payment terms in the SOW are commensurate with the efforts required to produce such deliverables are recognized as they are completed and accepted by customers.

 

Estimated losses on all SOW projects are recognized in full as soon as they become evident. In the years ended December 31, 2019 and 2018, no losses related to SOW projects were recorded.

 

Optical Sensor Modules Revenues:

 

We earn revenue from sales of sensor modules hardware products to our OEM and Tier 1 supplier customers, who embed our hardware into their products, and from sales of branded consumer products that incorporate our sensor modules sold through distributors or directly to end users. These distributors are generally given business terms that allow them to return unsold inventory, receive credits for changes in selling prices, and participate in various cooperative marketing programs. Our sales agreements generally provide customers with limited rights of return and warranty provisions.

 

The timing of revenue recognition related to AirBar modules depends upon how each sale is transacted - either point-of-sale or through distributors. We recognize revenue for AirBar modules sold point-of-sale when we provide the promised product to the customer.

 

Because we generally use distributors to provide AirBar and sensor modules to our customers, however, we analyze the terms of distributor agreements to determine when control passes from us to our distributors. For sales of AirBar and sensor modules sold through distributors, revenues are recognized when our distributors obtain control over our products. Control passes to our distributors when we have a present right to payment for products sold to distributors, the distributors have legal title to and physical possession of products purchased from us, and the distributors have significant risks and rewards of ownership of products purchased.

 

Distributors participate in various cooperative marketing and other incentive programs, and we maintain estimated accruals and allowances for these programs. If actual credits received by distributors under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected.

 

Under U.S. GAAP, companies may make reasonable aggregations and approximations of returns data to accurately estimate returns. Our AirBar returns and warranty experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve homogenous transactions. The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was insignificant as of December 31, 2019 and 2018. If the actual future returns were to deviate from the historical data on which the reserve had been established, our revenue could be adversely affected.

  

The following table presents disaggregated revenues by market for the years ended December 31, 2019 and 2018 (dollars in thousands):

  

   Year ended
December 31, 2019
   Year ended
December 31, 2018
 
   Amount   Percentage   Amount   Percentage 
Net license revenues from automotive  $1,839    28%  $1,627    19%
Net license revenues from consumer electronics   4,127    62%   6,327    74%
Net revenues from sensor modules   560    8%   227    3%
Net revenues from non-recurring engineering   120    2%   357    4%
   $6,646    100%  $8,538    100%

  

Significant Judgments

 

Our contracts with customers may include promises to transfer multiple products and services to a customer, particularly when one of our customers contracts with us for a product and related engineering services fees for customizing that product for our customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment may also be required to determine the SSP for each distinct performance obligation identified, although we generally structure our contracts such that performance obligations and pricing for each performance obligation are specifically addressed. We currently have no outstanding contracts with multiple performance obligations; however, we recently negotiated a contract that may include multiple performance obligations in the future.

 

Judgment is also required to determine when control of products passes from us to our distributors, as well as the amounts of product that may be returned to us. Our products are sold with a right of return, and we may provide other credits or incentives to our customers, which could result in variability when determining the amount of revenue to recognize. At the end of each reporting period, we use product returns history and additional information that becomes available to estimate returns and credits. We do not recognize revenue if it is probable that a significant reversal of any incremental revenue would occur.

 

Finally, judgment is required to determine the amount of unbilled license fees at the end of each reporting period.

 

Contract Balances

 

Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when we have an unconditional right to receive future payments from customers, and we record unearned deferred revenue when we receive prepayments or upfront payments for goods or services from our customers.

 

The following table presents accounts receivable, unbilled revenues and deferred revenues as of December 31, 2019 and 2018 (dollars in thousands):

  

   December 31,
2019
   December 31,
2018
 
Accounts receivable and unbilled revenues  $1,324   $1,830 
Deferred revenues   67    75 

  

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenues (contract assets), and customer advances and deposits or deferred revenue (contract liabilities) on the consolidated balance sheets. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets; contract assets are generally classified as current. The Company sometimes receives advances or deposits from its customers before revenue is recognized, which are reported as contract liabilities and are generally classified as current. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

 

We do not anticipate impairment of our contract asset related to license fee revenues, given the creditworthiness of our customers whose invoices comprise the balance in that asset account. We will continue to monitor the timeliness of receipts from those customers, however, to assess whether the contract asset has been impaired.

 

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.

 

Payment terms and conditions vary by the type of contract; however, payments generally occur 30-60 days after invoicing for license fees and sensor modules to our resellers and distributors. Where revenue recognition timing differs from invoice timing, we have determined that our contracts do not include a significant financing component. Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers, not to receive financing from our customers.

 

Costs to Obtain Contracts

 

We record the incremental costs of obtaining a contract with a customer as an 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.

 

Product Warranty

 

The following table summarizes the activity related to the product warranty liability (in thousands):

 

   Years ended 
   December 31,
2019
   December 31,
2018
 
Balance at beginning of period  $17   $35 
Provisions for warranty issued   7    (18)
Balance at end of period  $24   $17 

 

The Company accrues for warranty costs as part of its cost of sales of sensor modules based on estimated costs. The Company’s products are generally covered by a warranty for a period of 12 to 36 months from the customer receipt of the product.

   

Deferred Revenues

 

Deferred revenues consist primarily of prepayments for license fees, and other products or services for which we have been paid in advance, and earn the revenue when we transfer control of the product or service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services.

 

We defer license fees until we have met all accounting requirements for revenue recognition, which is when a license is made available to a customer and that customer has a right to use the license. Engineering development fee revenues are deferred until engineering services have been completed and accepted by our customers.

 

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

 

  

As of

December 31,
 
   2019   2018 
Deferred license revenues  $28   $- 
Deferred NRE revenues   20    - 
Deferred AirBar revenues   6    59 
Deferred sensor modules revenues   13    16 
   $67   $75 

 

Contracted revenue not yet recognized was $67,000 as of December 31, 2019; we expect to recognize approximately 100% of that revenue over the next twelve months. The Company recognized revenues of approximately $75,000 and $1.2 million, for 2019 and 2018 respectively, related to contract liabilities outstanding at the beginning of the year.

 

Advertising

 

Advertising costs are expensed as incurred. We will classify any reseller marketing allowances related to AirBar in general as sales expense unless we can define an identifiable benefit to us from the reseller marketing allowance. Advertising costs amounted to approximately $82,000 and $120,000 for the years ended December 31, 2019 and 2018, respectively.

 

Research and Development

 

Research and development (“R&D”) costs are expensed as incurred. R&D costs consist mainly of personnel related costs in addition to some 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.

  

Noncontrolling Interests

 

We recognize any noncontrolling interest, also known as a minority interest, as a separate line item in equity in the consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. We include the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the consolidated statements of operations.

 

The Company provides either in the consolidated statements of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

 

  (1) Net income or loss;
  (2) Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
  (3) Each component of other comprehensive income or loss.

 

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, 2019 and 2018. 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 payable for the current period.

 

We follow U.S. GAAP related to uncertain tax positions, which provisions include a two-step approach to recognizing, de-recognizing and measuring uncertain tax positions. As a result, we did not recognize a liability for unrecognized tax benefits. As of December 31, 2019 and 2018, 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 years ended December 31, 2019 and 2018. We effected a 1-for-10 reverse stock split on October 1, 2018. All shares of common stock and potential common stock equivalents in the calculations used to determine weighted average number of shares of common stock outstanding have been adjusted to reflect the effects of the reverse stock split for all periods presented. 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 years ended December 31, 2019 and 2018 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 14).

 

Other Comprehensive Income (Loss)

 

Our comprehensive income (loss) includes foreign currency translation gains and losses. The cumulative amount of translation gains and losses are reflected as a separate component of stockholders’ equity in the consolidated balance sheets, as accumulated other comprehensive loss.

 

Cash Flow Information

 

Cash flows in foreign currencies have been converted to U.S. Dollars at an approximate weighted-average exchange rate for the respective reporting periods. The weighted-average exchange rate for the consolidated statements of operations was as follows:

 

   Years ended December 31, 
   2019   2018 
Swedish Krona   9.46    8.70 
Japanese Yen   109.01    110.43 
South Korean Won   1,165.70    1,100.50 
Taiwan Dollar   30.90    30.15 

 

Exchange rate for the consolidated balance sheets was as follows:

 

   As of
December 31,
 
   2019   2018 
Swedish Krona   9.34    8.87 
Japanese Yen   108.66    109.69 
South Korean Won   1,154.56    1,113.63 
Taiwan Dollar   30.00    30.61 

 

Fair Value of Financial Instruments

 

We disclose the estimated fair values for all financial instruments for which it is practicable to estimate fair value. Financial instruments including cash, accounts receivable, accounts payable and accrued expenses and are deemed to approximate fair value due to their short maturities.

 

New Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Under ASU 2016-02 (and several subsequent accounting standards updates), lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term.

 

The effective date of the new lease standard (ASC 842) was January 1, 2019, and we adopted the new standard on that date. We used the required modified retrospective approach, which allowed us to make any necessary transition adjustments at January 1, 2019. We elected the optional transition method, which allowed us to continue to use disclosures required by the prior standard during 2019, the year of adoption. There were also several practical expedients available to make the transition more efficient and cost-effective for companies. We elected the package of three practical expedients available to us; doing so allowed us to not reassess existing leases.

 

We currently have a limited number of leased capital assets, all of which were classified as finance leases under the new lease standard. We maintain a lease inventory for those assets; they are currently reported on our consolidated balance sheets under the new standard. We analyzed our operating leases, and included two material operating leases on our consolidated balance sheets beginning January 1, 2019 which resulted in recording operating lease right-of-use assets and operating lease obligations of approximately $0.9 million. We did not have any equity adjustment related to our implementation of the new standard, and we will continue to provide disclosures related to leases. Because of the small number of assets we lease, we did not need to make systems changes to comply with the new standard. We continue to track leased assets outside of our accounting systems. We did not experience material changes in financial ratios, leasing practices, or tax reporting.

 

In September 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments”, (“ASU 2016-13”), supplemented by ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments”, (“ASU 2019-04”), ASU 2019-05, “Financial Instruments—Credit Losses (Topic 326)”, (“ASU 2019-05”), and ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses”, (“ASU 2018-19”), and ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses” (“ASU 2019-11”). The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 and the subsequent accounting standards updates were scheduled to become effective for fiscal years beginning after December 15, 2020, with early adoption permitted. On October 16, 2019, the FASB voted to delay implementation of the new credit losses standard for smaller reporting companies, among other organizations, until fiscal years beginning after December 15, 2022. In the future, we will evaluate the impact ASU 2016-13, ASU 2019-04, ASU 2019-05 and ASU 2018-19 will have on our consolidated financial statements, specifically regarding our trade receivables; however, we do not expect any significant impact from implementation of the new standard.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Tax, which simplifies the accounting for income taxes. ASU 2019-12 will become effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact ASU 2019-12 will have on our consolidated financial statements.

v3.20.1
Prepaid Expenses and Other Current Assets
12 Months Ended
Dec. 31, 2019
Prepaid Expense and Other Assets, Current [Abstract]  
Prepaid Expenses and Other Current Assets
3. Prepaid Expenses and Other Current Assets

 

Prepaid expense and other current assets consist of the following (in thousands):

 

   As of December 31, 
   2019   2018 
         
Prepaid insurance  $223   $168 
Prepaid rent   4    41 
VAT receivable   211    176 
Prepaid inventory   -    120 
Advances to suppliers   51    155 
Other   226    230 
Total prepaid expenses and other current assets  $715   $890
v3.20.1
Property and Equipment
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment
4. Property and Equipment

 

Property and equipment consist of the following (in thousands):

 

   As of December 31, 
   2019   2018 
         
Computers, software, furniture and fixtures  $1,406   $1,407 
Equipment under capital lease   3,348    3,525 
Less accumulated depreciation and amortization   (3,171)   (2,448)
Property and equipment, net  $1,583   $2,484 

 

Depreciation and amortization expense was $0.9 million and $1.0 million for the years ended December 31, 2019 and 2018, respectively.

v3.20.1
Accrued Expenses
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Accrued Expenses

5. Accrued Expenses

 

Accrued expenses consist of the following (in thousands):

 

   As of December 31, 
   2019   2018 
         
Accrued returns and warranty  $24   $17 
Accrued consulting fees and other   517    248 
Total accrued expenses  $541   $265 
v3.20.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
6. Fair Value Measurements

 

Accounting guidance defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements about fair value measurements. The accounting guidance does not mandate any new fair value measurements and is applicable to assets and liabilities that are required to be recorded at fair value under other accounting pronouncements.

 

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. We had no Level 1 assets or liabilities.

 

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices included in Level 1. We had no Level 2 assets or liabilities.

 

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. We had no Level 3 assets or liabilities. 

 

There were no assets or liabilities recorded at fair value on a recurring basis in 2019 and 2018.

v3.20.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Stockholders' Equity
7. Stockholders' Equity

 

Common Stock

 

On September 27, 2018, the Company filed the certificate of amendment to its restated certificate of incorporation with the state of Delaware to effect a reverse stock split, effective October 1, 2018. The Company also filed a certificate of amendment to its restated certificate of incorporation with the state of Delaware to reduce the number of authorized shares of common stock from 100,000,000 to 10,000,000 shares. The filing did not affect the number of authorized preferred stock of 1,000,000 shares.

 

As a result of the reverse stock split, every ten shares of issued and outstanding common stock were converted into one share of common stock, without any change in the par value per share. No fractional shares were issued, therefore shareholders entitled to receive a fractional share in connection with the reverse stock split received a cash payment instead. There was no financial impact to the Company's consolidated financial statements. All shares and per share information in this Form 10-K have been retroactively adjusted for all periods presented to reflect the reverse stock split, including reclassifying any amount equal to the reduction in par value of common stock to additional paid-in capital.

 

On December 28, 2018, we entered into a Securities Purchase Agreement with foreign investors, as part of a non-brokered private placement pursuant to which a total of 2,940,767 shares of common stock were issued. See Note 1 for more information.

  

Effective June 11, 2019, the Company further amended its restated certificate of incorporation to increase the number of authorized shares of common stock to 15,000,000 shares.

  

Warrants and Other Common Stock Activity

  

During the year ended December 31, 2019, warrants to purchase 360,000 shares of common stock were exercised for proceeds of $36,000. No warrants were exercised during 2018.

 

A summary of all warrant activity is set forth below:

 

Outstanding and exercisable  Warrants   Weighted Average Exercise Price   Weighted Average
Remaining Contractual Life
 
January 1, 2018   1,116,368   $10.18    3.68 
Issued   -    -    - 
December 31, 2018   1,116,368   $10.18    2.68 
Issued   -    -    - 
Expired/forfeited   -    -    - 
Exercised   (360,000)   0.10    - 
Outstanding and exercisable, December 31, 2019   756,368   $14.98    1.47 

 

Outstanding Warrants to Purchase Common Stock as of December 31, 2019:

   

Description   Issue Date   Exercise
Price
    Shares     Expiration
Date
                     
August 2016 Purchase Warrants   08/17/16   $ 11.20       431,368     02/17/22
August 2017 Purchase Warrants   08/08/17   $ 20.00       325,000     08/08/20
Total Warrants Outstanding                 756,368      

 

Preferred Stock

 

During the year ended December 31, 2019, the only shares of our preferred stock issued and outstanding were Series B Preferred Stock. Effective July 1, 2019, as described below, all outstanding shares of our Series B Preferred Stock were converted into shares of our common stock. The terms of our Series B Preferred Stock were as follows:

 

Dividends and Distributions

 

The holders of shares of Series B Preferred stock are entitled to participate with the holders of our common stock with respect to any dividends declared on the common stock in proportion to the number of shares of common stock issuable upon conversion of the shares of Series B Preferred stock held by them.

 

Liquidation Preference

 

In the event of any liquidation, dissolution, or winding up of our operations, either voluntary or involuntary, subject to the rights of the Series B Preferred stock and Senior Preferred stock, shall be entitled to receive, after any distribution to the holders of senior preferred stock and prior to and in preference to any distribution to the holders of common stock, $0.001 for each share of Series B Preferred stock then outstanding.

 

Voting

 

The holders of shares of Series B Preferred stock have one vote for each share of Series B Preferred stock held by them.

 

Conversion

 

Initially, each share of Series B Preferred stock was convertible into one share of our common stock. On March 31, 2009, our stockholders approved a resolution to increase the authorized share capital, and to increase the conversion ratio to 132.07 shares of our common stock for each share of Series B Preferred stock.  

 

In November 2018, a holder of 1 share of Series B Preferred stock converted into 132 shares of our common stock.

 

On April 10, 2019, a holder of 2 shares of Series B Preferred stock converted into 264 shares of our common stock.

 

Effective July 1, 2019, the Company implemented a conversion of all outstanding shares of Series B Preferred Stock into shares of common stock. Each share of Series B Preferred Stock was automatically converted into 132.07 shares of common stock. No fractional shares were issued. In lieu of any fractional shares, the resulting number of shares of common stock was rounded up to the nearest whole number. Accordingly, 80 shares of Series B Preferred Stock were converted into 10,577 shares of common stock. As of December 31, 2019, there were no shares of series B Preferred Stock outstanding.

v3.20.1
Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
8. Stock-Based Compensation

 

We have adopted equity incentive plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors. Except for certain options granted to certain Swedish employees, all employee, consultant and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based only on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments.

 

Stock Options

 

During the year ended December 31, 2015, our stockholders approved the Neonode Inc. 2015 Stock Incentive Plan (the “2015 Plan”) which replaced our 2006 Equity Incentive Plan (the “2006 Plan”). Although no new awards can be made under the 2006 Plan, it is still operative for previously granted awards. Under the 2015 Plan, 210,000 shares of common stock have been reserved for awards, including nonqualified stock option grants and restricted stock grants to officers, employees, non-employee directors and consultants. The terms of the awards granted under the 2015 Plan are set by our compensation committee at its discretion.

 

Accordingly, as of December 31, 2019, we had two equity incentive plans:

 

  The 2006 Equity Incentive Plan (the "2006 Plan").  
  The 2015 Equity Incentive Plan (the "2015 Plan").  

 

The following table summarizes information with respect to all options to purchase shares of common stock outstanding under the 2006 Plan and the 2015 Plan at December 31, 2019:

 

Options Outstanding
Range of Exercise Price  Number Outstanding and exercisable at 12/31/19   Weighted Average Remaining Contractual Life (years)   Weighted Average Exercise Price 
             
$ 0 -  $ 15.00   32,500    0.90   $14.95 
$ 15.01 -   $ 30.40   8,000    0.33   $30.40 
$ 30.40 -   $ 62.10   12,000    0.14   $59.60 
    52,500    1.37   $27.51 

 

A summary of the combined activity under all of the stock option plans is set forth below:

 

    Options Outstanding  
                Weighted-        
                Average        
          Weighted-     Remaining        
          Average     Contractual     Aggregate  
    Number of     Exercise     Life     Intrinsic  
    Shares     Price     (in years)     Value  
Options outstanding – January 1, 2018     175,600     $ 41.99       2.18      $      -  
Options granted     30,000       15.00               -  
Options exercised     -       -               -  
Options cancelled or expired     (105,800 )     41.36               -  
Options outstanding – December 31, 2018     99,800     $ 34.55       1.41       -  
Options granted     -       -               -  
Options exercised     -       -               -  
Options cancelled or expired     (47,300 )     42,35               -  
Options outstanding and vested – December 31, 2019     52,500     $ 27.51       1.37     $ -  

 

No stock options were granted during the year ended December 31, 2019. There were 30,000 stock options granted in 2018. The assumptions used to value stock options granted to directors, employees and consultants during the year ended December 31, 2018 are as follows:

 

   For the year ended 
   December 31, 2018 
     
Annual dividend yield   - 
Expected life (years)   1.5 
Risk-free interest rate   2.19%
Expected volatility   71.12%

 

During the years ended December 31, 2019 and 2018, we recorded $0 and $29,000, respectively, of compensation expense related to the vesting of stock options. The estimated fair value of the stock-based compensation was calculated using the Black-Scholes option pricing model as of the grant date of the stock option.

 

Stock options granted under the 2006 and 2015 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant.

 

Stock-Based Compensation

 

The stock-based compensation expense for the years ended December 31, 2019 and 2018 reflects the estimated fair value of the vested portion of options granted to directors, employees and non-employees.

 

    Years ended December 31,  
    2019     2018  
(In thousands)            
Sales and marketing    $ -      $ 6  
General and administrative     -       23  
Stock-based compensation expense   $     -     $ 29  

  

There is no remaining unrecognized compensation expense related to stock options as of December 31, 2019.

 

The estimated fair value of stock-based awards is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price. These factors could change in the future, which would affect fair values of stock options granted in such future periods and could cause volatility in the total amount of the stock-based compensation expense reported in future periods.

v3.20.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
9. Commitments and Contingencies

 

Indemnities and Guarantees

 

Our bylaws require that we indemnify each of our executive officers and directors for certain events or occurrences arising as a result of the officer or director serving in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The maximum potential amount of future payments we could be required to make under these indemnification agreements is unlimited. However, we have a directors' and officers' liability insurance policy that should enable us to recover a portion of future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is minimal and we have no liabilities recorded for these agreements as of December 31, 2019 and 2018.

 

We enter into indemnification provisions under our agreements with other companies in the ordinary course of business, typically with business partners, contractors, customers and landlords. Under these provisions we generally indemnify and hold harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of our activities or, in some cases, as a result of the indemnified party's activities under the agreement. These indemnification provisions often include indemnifications relating to representations made by us with regard to intellectual property rights. These indemnification provisions generally survive termination of the underlying agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is unlimited. We have not incurred material costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, we believe the estimated fair value of these agreements is minimal. Accordingly, we have no liabilities recorded for these indemnification provisions as of December 31, 2019 and 2018.

 

One of our manufacturing partners has previously purchased material for the final assembly of AirBars. To protect the manufacturer from losses in relation to AirBar production, we agreed to secure the value of the inventory in a bank guarantee. The initial guarantee was for $345,000 and valid until December 31, 2019. Since the sale of AirBars has been lower than expected, a major part of the inventory at the manufacturer remained unused when the due date of the bank guarantee neared. 

 

In November 2019, we agreed to purchase the excess AirBar inventory for approximately $141,000 and in conjunction with this, the bank guarantee was decreased to $210,000 and is valid until December 31, 2020.

 

Management’s judgment is that the bank guarantee is a contingent guarantee and management will record a liability when it is probable we will have to purchase the inventory. As of March 11, 2020, management’s judgment is that we will sell the remaining AirBars during 2020 and thereby purchase the components and the assembly service from the manufacturing partner throughout the year. No liability has therefore been recorded for the period ended December 31, 2019.

 

Patent Assignment

 

On May 6, 2019, the Company assigned a portfolio of patents to Aequitas Technologies LCC. The portfolio contains two patent families comprising nine U.S. patents, five non-U.S. patents and three pending U.S. patent applications. The assignment provides the Company the right to share potential proceeds generated from a licensing and monetization program.

 

Non-Recurring Engineering Development Costs

 

On April 25, 2013, we entered into an Analog Device Development Agreement with an effective date of December 6, 2012 (the "NN1002 Agreement") with Texas Instruments ("TI") pursuant to which TI agreed to integrate our intellectual property into an ASIC. Under the terms of the NN1002 Agreement, we agreed to pay TI $500,000 of non-recurring engineering costs at the rate of $0.25 per ASIC for each of the first 2 million ASICs sold. As of December 31, 2019, we had made no payments to TI under the NN1002 Agreement.

v3.20.1
Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases
10.Leases

 

We have operating leases for our corporate offices and our manufacturing facility, and finance leases for equipment. Our leases have remaining lease terms of one year to three years, and our two primary operating leases include options to extend the leases for one to three years; those operating leases also include options to terminate the leases within one year. Future renewal options that are not likely to be executed as of the balance sheet date are excluded from right-of-use assets and related lease liabilities.

 

Our operating leases represent building leases for our Stockholm corporate offices and our Kungsbacka manufacturing facility. Our corporate office lease is automatically renewed at a cost increase of 2% on a yearly basis, unless we provide written notice nine months prior to expiration date.

 

We report operating leased assets, as well as operating lease current and noncurrent obligations on our consolidated balance sheets for the right to use those buildings in our business. Our finance leases represent manufacturing equipment; we report the manufacturing equipment, as well as finance lease current and noncurrent obligations on our consolidated balance sheets for our manufacturing equipment.

 

Generally, interest rates are stated in our leases for equipment. When no interest rate is stated in a lease, however, we review the interest rates implicit in our recent finance leases to estimate our incremental borrowing rate. We determine the rate implicit in a lease by using the most recent finance lease rate, or other method we think most closely represents our incremental borrowing rate.

 

The components of lease expense were as follows (in thousands):

 

   For the year ended 
   December 31, 
   2019 
Operating lease cost (1)  $588 
      
Finance lease cost:     
Amortization of leased assets  $623 
Interest on lease liabilities   34 
Total finance lease cost  $657 

 

(1)Includes short term lease costs of $122,000 for the year ended December 31, 2019.

 

Supplemental cash flow information related to leases was as follows (in thousands):

 

    Year ended
December 31,
 
    2019  
Cash paid for amounts included in leases:      
Operating cash flows from operating leases   $ (404 )
Operating cash flows from finance leases   $ (34
Financing cash flows from finance leases   $ (535 )
         
Right-of-use assets obtained in exchange for lease obligations:        
Operating leases     -  
Finance leases     -  

 

Supplemental balance sheet information related to leases was as follows (in thousands):

 

    December 31,
2019
 
Operating leases      
Operating lease right-of-use assets   $ 416  
         
Current portion of operating lease obligations   $ 332  
Operating lease liabilities, net of current portion     58  
Total operating lease liabilities   $ 390  
         
Finance leases        
Property and equipment, at cost   $ 3,348  
Accumulated depreciation     (1,956 )
Property and equipment, net   $ 1,392  
         
Current portion of finance lease obligations   $ 568  
Finance lease obligations, net of current portion     508  
Total finance lease liabilities   $ 1,076  

 

    Year ended
December 31,
2019
 
Weighted Average Remaining Lease Term      
Operating leases     1.2 years  
Finance leases     1.6 years  
         
Weighted Average Discount Rate        
Operating leases (2)     5 %
Finance leases     2 %

 

(2)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

 

A summary of future minimum payments under non-cancellable operating lease commitments as of December 31, 2019 is as follows (in thousands):

 

Years ending December 31,Years   Total  
2020    $ 343  
2024     59  
      402  
Less imputed interest     (12 )
Total lease liabilities     390  
Less current portion     (332 )
    $ 58  

 

The following is a schedule of minimum future rentals on the non-cancelable finance leases as of December 31, 2019 (in thousands):

 

Year ending December 31,   Total  
2020    $ 585  
2021     477  
2022     37  
Total minimum payments required:     1,099  
Less amount representing interest:     (23 )
Present value of net minimum lease payments:     1,076  
Less current portion     (568 )
    $ 508  

 

Disclosures related to periods prior to adoption of ASC 842

 

Minimum future lease payments under capital and operating lease obligations as of December 31, 2018 were as follows:

 

Year ending December 31,   Capital     Operating  
2019   $ 602     $ 457  
2020     616       89  
2021     502       3  
2022     39       -  
Total minimum payments required     1,759     $ 549  
Less amount representing interest     (56 )        
Present value of net minimum lease payments     1,703          
Less current portion     (570 )        
    $ 1,133          
v3.20.1
Segment Information
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Segment Information
11. Segment Information

 

Our Company has one reportable segment, which is comprised of the touch technology licensing and sensor module business.

 

We report revenues from external customers based on the country where the customer is located. The following table presents revenues by geographic region for the years ended December 31, 2019 and 2018 (dollars in thousands):

 

   2019 
   Amount   Percentage 
United States  $3,158    48%
Japan   2,134    32%
Germany   617    9%
China   374    6%
Switzerland   105    2%
France   152    2%
Other   106    1%
Total  $6,646    100%

 

   2018 
   Amount   Percentage 
United States  $4,247    50%
Japan   2,877    34%
Germany   803    9%
China   221    3%
Taiwan   189    2%
South Korea   48    1%
Other   153    1%
Total  $8,538    100%
v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
12. Income Taxes

 

Loss before income taxes was distributed geographically for the years ended December 31, as follows (in thousands):

 

   2019   2018 
Domestic  $(4,200)  $(1,583)
Foreign   (1,564)   (2,346)
           
Total  $(5,764)  $(3,929)

 

The provision (benefit) for income taxes is as follows for the years ended December 31 (in thousands):

 

   2019   2018 
Current          
Federal  $-   $- 
State   2    2 
Foreign   36    11 
Change in deferred          
Federal   (447)   (109)
Federal valuation allowance   447    109 
State   20    (1)
State valuation allowance   (20)   1 
Foreign   (453)   (322)
Foreign valuation allowance   453    322 
           
Total current  $38   $13 

  

The differences between our effective income tax rate and the U.S. federal statutory federal income tax rate for the years ended December 31, are as follows:

 

    2019     2018  
Amounts at statutory tax rates     21 %     21 %
Foreign losses taxed at different rates     (2 )%     (1 )%
Stock-based compensation     (8 )%     (7 )%
Other     (1 )%     (2 )%
Total     10 %     11 %
Valuation allowance     (11 )%     (11 )%
Effective tax rate     (1 )%     - %

 

Significant components of the deferred tax asset balances at December 31 are as follows (in thousands):

 

   2019   2018 
Deferred tax assets:          
Accruals  $48   $71 
Stock compensation   159    567 
Net operating losses   16,293    14,982 
Basis difference in fixed assets   -    - 
Total deferred tax assets  $16,500   $15,620 
Valuation allowance   (16,500)   (15,620)
           
Total net deferred tax assets  $-   $- 

 

Valuation allowances are recorded to offset certain deferred tax assets due to management’s uncertainty of realizing the benefits of these items. Management applies a full valuation allowance for the accumulated losses of Neonode Inc., and its subsidiaries, since it is not determinable using the “more likely than not” criteria that there will be any future benefit of our deferred tax assets. This is mainly due to our history of operating losses. As of December 31, 2019, we had federal, state and foreign net operating losses of $63.8 million, $20.0 million and $7.3 million, respectively. The federal loss carryforward begins to expire in 2028, and the California loss carryforward begins to expire in 2030. The foreign loss carryforward, which is generated in Sweden, does not expire.

 

Utilization of the net operating loss and tax credit carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code and similar state provisions. The annual limitation may result in the expiration of the net operating losses and tax credit carryforwards before utilization.  As of December 31, 2019, we had not completed the determination of the amount to be limited under the provision.

 

We follow the provisions of accounting guidance which includes a two-step approach to recognizing, derecognizing and measuring uncertain tax positions. There were no unrecognized tax benefits for the years ended December 31, 2019 and 2018.

 

We follow the policy to classify accrued interest and penalties as part of the accrued tax liability in the provision for income taxes. For the years ended December 31, 2019 and 2018 we did not recognize any interest or penalties related to unrecognized tax benefits.

 

Our continuing practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of December 31, 2019 and 2018, we had no accrued interest and penalties related to uncertain tax matters.

 

As of December 31, 2019, we had no uncertain tax positions that would be reduced as a result of a lapse of the applicable statute of limitations.

 

We file income tax returns in the U.S. federal jurisdiction, California, Sweden, Japan, South Korea, and Taiwan. The 2008 through 2018 tax years are open and may be subject to potential examination in one or more jurisdictions. We are not currently under any federal, state or foreign income tax examinations.

v3.20.1
Employee Benefit Plans
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Employee Benefit Plans
13. Employee Benefit Plans

 

We participate in a number of individual defined contribution pension plans for our employees in Sweden. We contribute five percent (5%) of the employee's annual salary to these pension plans. For the Swedish management we contribute up to fifteen percent (15%) of the employee's annual salary. Contributions relating to these defined contribution plans for the years ended December 31, 2019 and 2018 were $395,000 and $413,000, respectively. We match U.S. employee contributions to a 401(K) retirement plan up to a maximum of six percent (6%) of an employee's annual salary. Contributions relating to the matching 401(K) contributions for the years ended December 31, 2019 and 2018 were $6,000 and $6,000, respectively. In Taiwan, we contribute six percent (6%) of the employee's annual salary to a pension fund which agrees with Taiwan's Labor Pension Act. Contributions relating to the Taiwanese pension fund for the years ended December 31, 2019 and 2018 were $3,000 and $4,000, respectively.

v3.20.1
Net Loss Per Share
12 Months Ended
Dec. 31, 2019
Loss per common share:  
Net Loss Per Share
14. Net Loss Per Share

 

Basic net loss per common share for the years ended December 31, 2019 and 2018 was computed by dividing the net loss attributable to Neonode Inc. for the relevant period by the weighted average number of shares of common stock outstanding during the year. Diluted loss per common share is computed by dividing net loss attributable to Neonode Inc. for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding during the year.

 

Potential common stock equivalents of approximately 0 and 350,000 outstanding stock warrants, 0 and 11,000 shares issuable upon conversion of preferred stock and 0 and 0 stock options are excluded from the diluted earnings per share calculation for the years ended December 31, 2019 and 2018, respectively, due to their anti-dilutive effect.

 

(In thousands, except per share amounts)  Years ended December 31, 
   2019   2018 
BASIC AND DILUTED        
Weighted average number of common shares outstanding   8,844    5,884 
           
Net loss attributable to Neonode Inc.  $(5,298)  $(3,060)
           
Net loss per share basic and diluted  $(0.60)  $(0.52)
v3.20.1
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Principles of Consolidation

Principles of Consolidation

 

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, as well as Pronode Technologies AB, a 51% majority owned subsidiary of Neonode Technologies AB. The remaining 49% of Pronode Technologies AB is owned by Propoint AB, located in Gothenburg, Sweden. Pronode Technologies AB was organized to sell engineering services within the automotive markets. All inter-company accounts and transactions have been eliminated in consolidation.

 

Neonode consolidates entities in which it has a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights.

 

The consolidated balance sheets at December 31, 2019 and 2018 and the consolidated statements of operations, comprehensive loss, stockholders equity and cash flows for the years ended 2019 and 2018 include our accounts and those of our wholly owned subsidiaries as well as Pronode Technologies AB.

Estimates

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. Actual results could differ from these estimates and judgments.

 

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; measuring variable consideration and other obligations such as product returns and refunds, and product warranties; provisions for uncollectible receivables; determining the net realizable value of inventory; recoverability of capitalized project costs and long-lived asset; 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. 

Cash and cash equivalents

Cash and Cash Equivalents

 

We have not had any liquid investments other than normal cash deposits with bank institutions to date. The Company considers all highly liquid investments with original maturities of three months of less to be cash equivalents.

Concentration of Cash Balance Risks

Concentration of Cash Balance Risks

 

Cash balances are maintained at various banks in the U.S., Japan, Korea, Taiwan and Sweden. For deposits held with financial institutions in the U.S., the U.S. Federal Deposit Insurance Corporation, provides basic deposit coverage with limits up to $250,000 per owner. The Swedish government provides insurance coverage up to 100,000 Euro per customer and covers deposits in all types of accounts. The Japanese government provides insurance coverage up to 10,000,000 Yen per customer. The Korea Deposit Insurance Corporation provides insurance coverage up to 50,000,000 Won per customer. The Central Deposit Insurance Corporation in Taiwan provides insurance coverage up to 3,000,000 Taiwan Dollar per customer. At times, deposits held with financial institutions may exceed the amount of insurance provided.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable and Allowance for Doubtful Accounts  

 

Accounts receivable is stated at net realizable value. Our policy is to maintain allowances for estimated losses resulting from the inability of our customers to make required payments. Credit limits are established through a process of reviewing the financial history and stability of each customer. Should all efforts fail to recover the related receivable, we will write off the account. We also record an allowance for all customers based on certain other factors including the length of time the receivables are past due and historical collection experience with customers. Our allowance for doubtful accounts was approximately $85,000 and $149,000 as of December 31, 2019 and 2018, respectively.

Projects in process

Projects in Process

 

Projects in process consist of costs incurred toward the completion of various projects for certain customers. These costs are primarily comprised of direct engineering labor costs and project-specific equipment costs. These costs are capitalized on our balance sheet as an asset and deferred until revenue for each project is recognized in accordance with our revenue recognition policy. Costs capitalized in projects in process were $8,000 as of December 31, 2019. There were no costs capitalized in projects in process as of December 31, 2018.

Inventory

Inventory

 

Inventory is stated at the lower of cost and net realizable value, using the first-in, first-out ("FIFO") valuation method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

 

Due to the low sell-through of our AirBar products, management has decided to fully reserve work-in-process for AirBar components, as well as AirBar related raw materials. Management has further decided to reserve for a portion of AirBar finished goods, depending on type of AirBar and in which location it is stored. The AirBar inventory reserve was $0.8 million and $1.0 million for the years ended December 31, 2019 and 2018, respectively.

 

In order to protect our manufacturing partners from losses in relation to AirBar production, we agreed to secure the value of the inventory with a bank guarantee. Since the sale of AirBars has been lower than expected, a major part of the inventory at the partner remained unused when the due date of the bank guarantee neared and Neonode therefore agreed that the partner should keep inventory for the production of 20,000 AirBars and the rest be purchased by us. The inventory value of these purchases has been fully reserved.

 

As of December 31, 2019, the Company's inventory consists primarily of components that will be used in the manufacturing of our sensor modules. We segregate inventory for reporting purposes by raw materials, work-in-process, and finished goods.

 

Raw materials, work-in-process, and finished goods are as follows (in thousands):

 

   December 31,   December 31, 
   2019   2018 
Raw materials  $396   $246 
Work-in-process   186    220 
Finished goods   448    753 
Ending inventory  $1,030   $1,219 
Investment in Joint Venture

Investment in Joint Venture

 

We invested $3,000 for a 50% interest in Neoeye AB. We account for our investment using the equity method of accounting since the investment provides us the ability to exercise significant influence, but not control, over the investee. We are not required to guarantee any obligations of the joint venture. There have been no operations of Neoeye through December 31, 2019.

Property and Equipment

Property and Equipment

 

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method based upon estimated useful lives of the assets as follows:

 

    Estimated useful lives
     
Computer equipment   3 years
Furniture and fixtures   5 years
Equipment   7 years

 

Equipment purchased under a finance lease is depreciated over the term of the lease, if that lease term is shorter than the estimated useful life.

 

Upon retirement or sale of property and equipment, cost and accumulated depreciation and amortization are removed from the accounts and any gains or losses are reflected in the consolidated statement of operations. Maintenance and repairs are charged to expense as incurred.

Right-of-Use Assets

Right-of-Use Assets

 

A right-of-use asset represents a lessee's right to use a leased asset for the term of the lease. Our right-of-use assets generally consist of operating leases for buildings.

 

Right-of-use assets are measured initially at the present value of the lease payments, plus any lease payments made before a lease began and any initial direct costs, such as commissions paid to obtain a lease.

 

Right-of-use assets are subsequently measured at the present value of the remaining lease payments, adjusted for incentives, prepaid or accrued rent, and any initial direct costs not yet expensed.

Long-Lived Assets

Long-Lived Assets

 

We assess any impairment by estimating the future cash flow from the associated asset in accordance with relevant accounting guidance. If the estimated undiscounted future cash flow related to these assets decreases or the useful life is shorter than originally estimated, we may incur charges for impairment of these assets. As of December 31, 2019, we believe there was no impairment of our long-lived assets. There can be no assurance, however, that market conditions will not change or sufficient demand for our products and services will continue, which could result in impairment of long-lived assets in the future.

Foreign Currency Translation and Transaction Gains and Losses

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 or the Taiwan Dollar 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). Gains (losses) resulting from foreign currency transactions are included in general and administrative expenses in the accompanying consolidated statements of operations and were $105,000 and $(58,000) during the years ended December 31, 2019 and 2018, respectively. Foreign currency translation gains or (losses) were $(183,000) and $(357,000) during the years ended December 31, 2019 and 2018, respectively.

Concentration of Credit and Business Risks

Concentration of Credit and Business Risks

 

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

 

As of December 31, 2019, three customers represented approximately 72% of our consolidated accounts receivable and unbilled revenues.

 

As of December 31, 2018, four customers represented approximately 67% of our consolidated accounts receivable and unbilled revenues.

 

Customers who accounted for 10% or more of our net revenues during the year ended December 31, 2019 are as follows.

 

  Hewlett-Packard Company – 38%
     
  Epson – 16%
     
  Alpine – 15%

 

Customers who accounted for 10% or more of our net revenues during the year ended December 31, 2018 are as follows.

 

  Hewlett-Packard Company – 35%
     
  Epson – 14%
     
  Canon – 12%

 

The Company conducts business in the United States, Europe and Asia. At December 31, 2019, the Company maintained approximately $2,637,000, $1,148,000 and $62,000 of its net assets in the United States, Europe and Asia, respectively. At December 31, 2018, the Company maintained approximately $2,537,000, $7,187,000 and $72,000 of its net assets in the United States, Europe and Asia, respectively.

Revenue Recognition

 Revenue Recognition

 

We recognize revenue when control of products is transferred to our customers, and when services are completed and accepted by our customers; the amount of revenue we recognize reflects the consideration we expect to receive for those products or services. Our contracts with customers may include combinations of products and services, for example, a contract that includes products and related engineering services. We structure our contracts such that distinct performance obligations, such as product sales or license fees, and related engineering services, are clearly defined in each contract.

 

License fees for products and sales of AirBar and sensor modules are on a per-unit basis; therefore, we generally satisfy performance obligations as units are shipped to our customers. Non-recurring engineering service performance obligations are satisfied as work is performed and accepted by our customers.

 

We recognize revenue net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. We treat all product shipping and handling charges (regardless of when they occur) as activities to fulfill the promise to transfer goods, therefore we treat all shipping and handling charges as expenses.

 

Licensing Revenues:

 

We earn revenue from licensing our internally developed intellectual property ("IP"). 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 license fees relating to our IP, 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. At the end of each reporting period, we record unbilled license fees, using prior royalty revenue data by customer to make accurate estimates of those royalties.

 

Explicit return rights are not offered to customers. There have been no returns through December 31, 2019.

 

Engineering Services:

 

For technology license or sensor module contracts that require modification or customization of the underlying technology to adapt that technology to customer use, we determine whether the technology license or sensor module, and 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 generally charge an hourly rate for engineering services, and we recognize revenue as engineering services specified in contracts are completed and accepted by our customers. Any upfront payments we receive for future non-recurring engineering services are recorded as unearned revenue until that revenue is earned.

  

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.

 

Revenues from engineering services contracts that are short-term in nature are recorded when those services are complete and accepted by customers.

 

Revenues from engineering services contracts with substantive defined deliverables for which payment terms in the SOW are commensurate with the efforts required to produce such deliverables are recognized as they are completed and accepted by customers.

 

Estimated losses on all SOW projects are recognized in full as soon as they become evident. In the years ended December 31, 2019 and 2018, no losses related to SOW projects were recorded.

 

Optical Sensor Modules Revenues:

 

We earn revenue from sales of sensor modules hardware products to our OEM and Tier 1 supplier customers, who embed our hardware into their products, and from sales of branded consumer products that incorporate our sensor modules sold through distributors or directly to end users. These distributors are generally given business terms that allow them to return unsold inventory, receive credits for changes in selling prices, and participate in various cooperative marketing programs. Our sales agreements generally provide customers with limited rights of return and warranty provisions.

 

The timing of revenue recognition related to AirBar modules depends upon how each sale is transacted - either point-of-sale or through distributors. We recognize revenue for AirBar modules sold point-of-sale when we provide the promised product to the customer.

 

Because we generally use distributors to provide AirBar and sensor modules to our customers, however, we analyze the terms of distributor agreements to determine when control passes from us to our distributors. For sales of AirBar and sensor modules sold through distributors, revenues are recognized when our distributors obtain control over our products. Control passes to our distributors when we have a present right to payment for products sold to distributors, the distributors have legal title to and physical possession of products purchased from us, and the distributors have significant risks and rewards of ownership of products purchased.

 

Distributors participate in various cooperative marketing and other incentive programs, and we maintain estimated accruals and allowances for these programs. If actual credits received by distributors under these programs were to deviate significantly from our estimates, which are based on historical experience, our revenue could be adversely affected.

 

Under U.S. GAAP, companies may make reasonable aggregations and approximations of returns data to accurately estimate returns. Our AirBar returns and warranty experience to date has enabled us to make reasonable returns estimates, which are supported by the fact that our product sales involve homogenous transactions. The reserve for future sales returns is recorded as a reduction of our accounts receivable and revenue and was insignificant as of December 31, 2019 and 2018. If the actual future returns were to deviate from the historical data on which the reserve had been established, our revenue could be adversely affected.

  

The following table presents disaggregated revenues by market for the years ended December 31, 2019 and 2018 (dollars in thousands):

  

   Year ended
December 31, 2019
   Year ended
December 31, 2018
 
   Amount   Percentage   Amount   Percentage 
Net license revenues from automotive  $1,839    28%  $1,627    19%
Net license revenues from consumer electronics   4,127    62%   6,327    74%
Net revenues from sensor modules   560    8%   227    3%
Net revenues from non-recurring engineering   120    2%   357    4%
   $6,646    100%  $8,538    100%
Significant Judgments

Significant Judgments

 

Our contracts with customers may include promises to transfer multiple products and services to a customer, particularly when one of our customers contracts with us for a product and related engineering services fees for customizing that product for our customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately may require significant judgment. Judgment may also be required to determine the SSP for each distinct performance obligation identified, although we generally structure our contracts such that performance obligations and pricing for each performance obligation are specifically addressed. We currently have no outstanding contracts with multiple performance obligations; however, we recently negotiated a contract that may include multiple performance obligations in the future.

 

Judgment is also required to determine when control of products passes from us to our distributors, as well as the amounts of product that may be returned to us. Our products are sold with a right of return, and we may provide other credits or incentives to our customers, which could result in variability when determining the amount of revenue to recognize. At the end of each reporting period, we use product returns history and additional information that becomes available to estimate returns and credits. We do not recognize revenue if it is probable that a significant reversal of any incremental revenue would occur.

 

Finally, judgment is required to determine the amount of unbilled license fees at the end of each reporting period.

Contract Balances

Contract Balances

 

Timing of revenue recognition may differ from the timing of invoicing to customers. We record a receivable when we have an unconditional right to receive future payments from customers, and we record unearned deferred revenue when we receive prepayments or upfront payments for goods or services from our customers.

 

The following table presents accounts receivable, unbilled revenues and deferred revenues as of December 31, 2019 and 2018 (dollars in thousands):

  

   December 31,
2019
   December 31,
2018
 
Accounts receivable and unbilled revenues  $1,324   $1,830 
Deferred revenues   67    75 

  

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled revenues (contract assets), and customer advances and deposits or deferred revenue (contract liabilities) on the consolidated balance sheets. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets; contract assets are generally classified as current. The Company sometimes receives advances or deposits from its customers before revenue is recognized, which are reported as contract liabilities and are generally classified as current. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

 

We do not anticipate impairment of our contract asset related to license fee revenues, given the creditworthiness of our customers whose invoices comprise the balance in that asset account. We will continue to monitor the timeliness of receipts from those customers, however, to assess whether the contract asset has been impaired.

 

The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence.

 

Payment terms and conditions vary by the type of contract; however, payments generally occur 30-60 days after invoicing for license fees and sensor modules to our resellers and distributors. Where revenue recognition timing differs from invoice timing, we have determined that our contracts do not include a significant financing component. Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers, not to receive financing from our customers.

Costs to Obtain Contracts

Costs to Obtain Contracts

 

We record the incremental costs of obtaining a contract with a customer as an 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.

Product Warranty

Product Warranty

 

The following table summarizes the activity related to the product warranty liability (in thousands):

 

   Years ended 
   December 31,
2019
   December 31,
2018
 
Balance at beginning of period  $17   $35 
Provisions for warranty issued   7    (18)
Balance at end of period  $24   $17 

 

The Company accrues for warranty costs as part of its cost of sales of sensor modules based on estimated costs. The Company’s products are generally covered by a warranty for a period of 12 to 36 months from the customer receipt of the product.

Deferred Revenues

Deferred Revenues

 

Deferred revenues consist primarily of prepayments for license fees, and other products or services for which we have been paid in advance, and earn the revenue when we transfer control of the product or service. Deferred revenues may also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services.

 

We defer license fees until we have met all accounting requirements for revenue recognition, which is when a license is made available to a customer and that customer has a right to use the license. Engineering development fee revenues are deferred until engineering services have been completed and accepted by our customers.

 

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

 

  

As of

December 31,
 
   2019   2018 
Deferred license revenues  $28   $- 
Deferred NRE revenues   20    - 
Deferred AirBar revenues   6    59 
Deferred sensor modules revenues   13    16 
   $67   $75 

 

Contracted revenue not yet recognized was $67,000 as of December 31, 2019; we expect to recognize approximately 100% of that revenue over the next twelve months. The Company recognized revenues of approximately $75,000 and $1.2 million, for 2019 and 2018 respectively, related to contract liabilities outstanding at the beginning of the year.

Advertising

Advertising

 

Advertising costs are expensed as incurred. We will classify any reseller marketing allowances related to AirBar in general as sales expense unless we can define an identifiable benefit to us from the reseller marketing allowance. Advertising costs amounted to approximately $82,000 and $120,000 for the years ended December 31, 2019 and 2018, respectively.

Research and Development

Research and Development

 

Research and development ("R&D") costs are expensed as incurred. R&D costs consist mainly of personnel related costs in addition to some external consultancy costs such as testing, certifying and measurements.

Stock-Based Compensation Expense

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.

Noncontrolling Interests

Noncontrolling Interests

 

We recognize any noncontrolling interest, also known as a minority interest, as a separate line item in equity in the consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to us. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. We include the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the consolidated statements of operations.

 

The Company provides either in the consolidated statements of stockholders' equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

 

  (1) Net income or loss;
  (2) Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
  (3) Each component of other comprehensive income or loss.
Income taxes

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, 2019 and 2018. 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 payable for the current period.

 

We follow U.S. GAAP related to uncertain tax positions, which provisions include a two-step approach to recognizing, de-recognizing and measuring uncertain tax positions. As a result, we did not recognize a liability for unrecognized tax benefits. As of December 31, 2019 and 2018, we had no unrecognized tax benefits.

Net Loss per Share

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 years ended December 31, 2019 and 2018. We effected a 1-for-10 reverse stock split on October 1, 2018. All shares of common stock and potential common stock equivalents in the calculations used to determine weighted average number of shares of common stock outstanding have been adjusted to reflect the effects of the reverse stock split for all periods presented. 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 years ended December 31, 2019 and 2018 exclude the potential common stock equivalents, as the effect would be anti-dilutive (see Note 13).

Other Comprehensive Income (Loss)

Other Comprehensive Income (Loss)

 

Our comprehensive income (loss) includes foreign currency translation gains and losses. The cumulative amount of translation gains and losses are reflected as a separate component of stockholders' equity in the consolidated balance sheets, as accumulated other comprehensive loss.

Cash Flow Information

Cash Flow Information

 

Cash flows in foreign currencies have been converted to U.S. Dollars at an approximate weighted-average exchange rate for the respective reporting periods. The weighted-average exchange rate for the consolidated statements of operations was as follows:

 

   Years ended December 31, 
   2019   2018 
Swedish Krona   9.46    8.70 
Japanese Yen   109.01    110.43 
South Korean Won   1,165.70    1,100.50 
Taiwan Dollar   30.90    30.15 

 

Exchange rate for the consolidated balance sheets was as follows:

 

   As of
December 31,
 
   2019   2018 
Swedish Krona   9.34    8.87 
Japanese Yen   108.66    109.69 
South Korean Won   1,154.56    1,113.63 
Taiwan Dollar   30.00    30.61 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

We disclose the estimated fair values for all financial instruments for which it is practicable to estimate fair value. Financial instruments including cash, accounts receivable, accounts payable and accrued expenses and are deemed to approximate fair value due to their short maturities.

New Accounting Pronouncements

New Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). Under ASU 2016-02 (and several subsequent accounting standards updates), lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee's right to use, or control the use of, a specified asset for the lease term.

 

The effective date of the new lease standard (ASC 842) was January 1, 2019, and we adopted the new standard on that date. We used the required modified retrospective approach, which allowed us to make any necessary transition adjustments at January 1, 2019. We elected the optional transition method, which allowed us to continue to use disclosures required by the prior standard during 2019, the year of adoption. There were also several practical expedients available to make the transition more efficient and cost-effective for companies. We elected the package of three practical expedients available to us; doing so allowed us to not reassess existing leases.

 

We currently have a limited number of leased capital assets, all of which were classified as finance leases under the new lease standard. We maintain a lease inventory for those assets; they are currently reported on our consolidated balance sheets under the new standard. We analyzed our operating leases, and included two material operating leases on our consolidated balance sheets beginning January 1, 2019 which resulted in recording operating lease right-of-use assets and operating lease obligations of approximately $0.9 million. We did not have any equity adjustment related to our implementation of the new standard, and we will continue to provide disclosures related to leases. Because of the small number of assets we lease, we did not need to make systems changes to comply with the new standard. We continue to track leased assets outside of our accounting systems. We did not experience material changes in financial ratios, leasing practices, or tax reporting.

 

In September 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326)-Measurement of Credit Losses on Financial Instruments", ("ASU 2016-13"), supplemented by ASU 2019-04, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments", ("ASU 2019-04"), ASU 2019-05, "Financial Instruments—Credit Losses (Topic 326)", ("ASU 2019-05"), and ASU 2018-19, "Codification Improvements to Topic 326, Financial Instruments – Credit Losses", ("ASU 2018-19"), and ASU 2019-11, "Codification Improvements to Topic 326, Financial Instruments – Credit Losses" ("ASU 2019-11"). The new standard requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. ASU 2016-13 and the subsequent accounting standards updates were scheduled to become effective for fiscal years beginning after December 15, 2020, with early adoption permitted. On October 16, 2019, the FASB voted to delay implementation of the new credit losses standard for smaller reporting companies, among other organizations, until fiscal years beginning after December 15, 2022. In the future, we will evaluate the impact ASU 2016-13, ASU 2019-04, ASU 2019-05 and ASU 2018-19 will have on our consolidated financial statements, specifically regarding our trade receivables; however, we do not expect any significant impact from implementation of the new standard.

 

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Tax, which simplifies the accounting for income taxes. ASU 2019-12 will become effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact ASU 2019-12 will have on our consolidated financial statements.

v3.20.1
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Schedule of inventory
   December 31,   December 31, 
   2019   2018 
Raw materials  $396   $246 
Work-in-process   186    220 
Finished goods   448    753 
Ending inventory  $1,030   $1,219 
Schedule of estimated useful lives of property and equipment

    Estimated useful lives
     
Computer equipment   3 years
Furniture and fixtures   5 years
Equipment   7 years
Schedule of disaggregated revenues
   Year ended
December 31, 2019
   Year ended
December 31, 2018
 
   Amount   Percentage   Amount   Percentage 
Net license revenues from automotive  $1,839    28%  $1,627    19%
Net license revenues from consumer electronics   4,127    62%   6,327    74%
Net revenues from sensor modules   560    8%   227    3%
Net revenues from non-recurring engineering   120    2%   357    4%
   $6,646    100%  $8,538    100%
Schedule of prepayments or upfront payments for goods or services from our customers

   December 31,
2019
   December 31,
2018
 
Accounts receivable and unbilled revenues  $1,324   $1,830 
Deferred revenues   67    75 
Schedule of activity related to the product warranty liability

   Years ended 
   December 31,
2019
   December 31,
2018
 
Balance at beginning of period  $17   $35 
Provisions for warranty issued   7    (18)
Balance at end of period  $24   $17 

Schedule of deferred revenues

  

As of

December 31,
 
   2019   2018 
Deferred license revenues  $28   $- 
Deferred NRE revenues   20    - 
Deferred AirBar revenues   6    59 
Deferred sensor modules revenues   13    16 
   $67   $75 

Schedule of weighted average exchange rate for the condensed consolidated statements of operations

   Years ended December 31, 
   2019   2018 
Swedish Krona   9.46    8.70 
Japanese Yen   109.01    110.43 
South Korean Won   1,165.70    1,100.50 
Taiwan Dollar   30.90    30.15 

Schedule of exchange rate for the consolidated balance sheets

   As of
December 31,
 
   2019   2018 
Swedish Krona   9.34    8.87 
Japanese Yen   108.66    109.69 
South Korean Won   1,154.56    1,113.63 
Taiwan Dollar   30.00    30.61 

v3.20.1
Prepaid Expenses and Other Current Assets (Tables)
12 Months Ended
Dec. 31, 2019
Prepaid Expense and Other Assets, Current [Abstract]  
Schedule of prepaid expense and other current assets
   As of December 31, 
   2019   2018 
         
Prepaid insurance  $223   $168 
Prepaid rent   4    41 
VAT receivable   211    176 
Prepaid inventory   -    120 
Advances to suppliers   51    155 
Other   226    230 
Total prepaid expenses and other current assets  $715   $890 
v3.20.1
Property and Equipment (Tables)
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment

   As of December 31, 
   2019   2018 
         
Computers, software, furniture and fixtures  $1,406   $1,407 
Equipment under capital lease   3,348    3,525 
Less accumulated depreciation and amortization   (3,171)   (2,448)
Property and equipment, net  $1,583   $2,484 
v3.20.1
Accrued Expenses (Tables)
12 Months Ended
Dec. 31, 2019
Payables and Accruals [Abstract]  
Schedule of accrued expenses

   As of December 31, 
   2019   2018 
         
Accrued returns and warranty  $24   $17 
Accrued consulting fees and other   517    248 
Total accrued expenses  $541   $265 
v3.20.1
Stockholders' Equity (Tables)
12 Months Ended
Dec. 31, 2019
Class of Stock [Line Items]  
Summary of all warrant activity
Outstanding and exercisable  Warrants   Weighted Average Exercise Price   Weighted Average
Remaining Contractual Life
 
January 1, 2018   1,116,368   $10.18    3.68 
Issued   -    -    - 
December 31, 2018   1,116,368   $10.18    2.68 
Issued   -    -    - 
Expired/forfeited   -    -    - 
Exercised   (360,000)   0.10    - 
Outstanding and exercisable, December 31, 2019   756,368   $14.98    1.47 
Warrant [Member]  
Class of Stock [Line Items]  
Summary of all stock option plans / warrant activity

Outstanding Warrants to Purchase Common Stock as of December 31, 2019:

   

Description   Issue Date   Exercise
Price
    Shares     Expiration
Date
                     
August 2016 Purchase Warrants   08/17/16   $ 11.20       431,368     02/17/22
August 2017 Purchase Warrants   08/08/17   $ 20.00       325,000     08/08/20
Total Warrants Outstanding                 756,368      
v3.20.1
Stock-Based Compensation (Tables)
12 Months Ended
Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Summary of options outstanding by exercise price range

Options Outstanding
Range of Exercise Price  Number Outstanding and exercisable at 12/31/19   Weighted Average Remaining Contractual Life (years)   Weighted Average Exercise Price 
             
$ 0 -  $ 15.00   32,500    0.90   $14.95 
$ 15.01 -   $ 30.40   8,000    0.33   $30.40 
$ 30.40 -   $ 62.10   12,000    0.14   $59.60 
    52,500    1.37   $27.51 
Summary of assumptions used to value stock options granted to employees and directors

   For the year ended 
   December 31, 2018 
     
Annual dividend yield   - 
Expected life (years)   1.5 
Risk-free interest rate   2.19%
Expected volatility   71.12%
Summary of stock-based compensation expense
    Years ended December 31,  
    2019     2018  
(In thousands)            
Sales and marketing    $ -      $ 6  
General and administrative     -       23  
Stock-based compensation expense   $     -     $ 29  
Employee Stock Option [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Summary of all stock option plans / warrant activity

 

    Options Outstanding  
                Weighted-        
                Average        
          Weighted-     Remaining        
          Average     Contractual     Aggregate  
    Number of     Exercise     Life     Intrinsic  
    Shares     Price     (in years)     Value  
Options outstanding – January 1, 2018     175,600     $ 41.99       2.18      $      -  
Options granted     30,000       15.00               -  
Options exercised     -       -               -  
Options cancelled or expired     (105,800 )     41.36               -  
Options outstanding – December 31, 2018     99,800     $ 34.55       1.41       -  
Options granted     -       -               -  
Options exercised     -       -               -  
Options cancelled or expired     (47,300 )     42,35               -  
Options outstanding and vested – December 31, 2019     52,500     $ 27.51       1.37     $ -  

v3.20.1
Leases (Tables)
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Schedule of components of lease expense
  For the year ended 
   December 31, 
   2019 
Operating lease cost (1)  $588 
      
Finance lease cost:     
Amortization of leased assets  $623 
Interest on lease liabilities   34 
Total finance lease cost  $657 

 

(1)Includes short term lease costs of $122,000 for the year ended December 31, 2019.
Schedule of supplemental cash flow information related to leases
    Year ended
December 31,
 
    2019  
Cash paid for amounts included in leases:      
Operating cash flows from operating leases   $ (404 )
Operating cash flows from finance leases   $ (34
Financing cash flows from finance leases   $ (535 )
         
Right-of-use assets obtained in exchange for lease obligations:        
Operating leases     -  
Finance leases     -  
Schedule of supplemental balance sheet information

    December 31,
2019
 
Operating leases      
Operating lease right-of-use assets   $ 416  
         
Current portion of operating lease obligations   $ 332  
Operating lease liabilities, net of current portion     58  
Total operating lease liabilities   $ 390  
         
Finance leases        
Property and equipment, at cost   $ 3,348  
Accumulated depreciation     (1,956 )
Property and equipment, net   $ 1,392  
         
Current portion of finance lease obligations   $ 568  
Finance lease obligations, net of current portion     508  
Total finance lease liabilities   $ 1,076  
Schedule of future minimum payments under non-cancellable operating lease commitments
    Year ended
December 31,
2019
 
Weighted Average Remaining Lease Term      
Operating leases     1.2 years  
Finance leases     1.6 years  
         
Weighted Average Discount Rate        
Operating leases (2)     5 %
Finance leases     2 %

 

(2)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
Schedule of minimum future rentals on the non-cancelable finance leases
Years ending December 31,   Total  
2020    $ 343  
2024     59  
      402  
Less imputed interest     (12 )
Total lease liabilities     390  
Less current portion     (332 )
    $ 58  

  

Year ending December 31,   Total  
2020    $ 585  
2021     477  
2022     37  
Total minimum payments required:     1,099  
Less amount representing interest:     (23 )
Present value of net minimum lease payments:     1,076  
Less current portion     (568 )
    $

508 

 

 

Year ending December 31,  Capital   Operating 
2019  $602   $457 
2020   616    89 
2021   502    3 
2022   39    - 
Total minimum payments required   1,759   $549 
Less amount representing interest   (56)     
Present value of net minimum lease payments   1,703      
Less current portion   (570)     
   $1,133      

v3.20.1
Segment Information (Tables)
12 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Summary of net revenues by geographic region
  2019 
   Amount   Percentage 
United States  $3,158    48%
Japan   2,134    32%
Germany   617    9%
China   374    6%
Switzerland   105    2%
France   152    2%
Other   106    1%
Total  $6,646    100%

 

   2018 
   Amount   Percentage 
United States  $4,247    50%
Japan   2,877    34%
Germany   803    9%
China   221    3%
Taiwan   189    2%
South Korea   48    1%
Other   153    1%
Total  $8,538    100%
v3.20.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Summary of loss before income taxes by geographically

   2019   2018 
Domestic  $(4,200)  $(1,583)
Foreign   (1,564)   (2,346)
           
Total  $(5,764)  $(3,929)

Summary of provision for income taxes
   2019   2018 
Current          
Federal  $-   $- 
State   2    2 
Foreign   36    11 
Change in deferred          
Federal   (447)   (109)
Federal valuation allowance   447    109 
State   20    (1)
State valuation allowance   (20)   1 
Foreign   (453)   (322)
Foreign valuation allowance   453    322 
           
Total current  $38   $13 
Summary of effective income tax rate and the U.S. federal statutory federal income tax rate
    2019     2018  
Amounts at statutory tax rates     21 %     21 %
Foreign losses taxed at different rates     (2 )%     (1 )%
Stock-based compensation     (8 )%     (7 )%
Other     (1 )%     (2 )%
Total     10 %     11 %
Valuation allowance     (11 )%     (11 )%
Effective tax rate     (1 )%     - %
Summary of significant components of the deferred tax asset

   2019   2018 
Deferred tax assets:          
Accruals  $48   $71 
Stock compensation   159    567 
Net operating losses   16,293    14,982 
Basis difference in fixed assets   -    - 
Total deferred tax assets  $16,500   $15,620 
Valuation allowance   (16,500)   (15,620)
           
Total net deferred tax assets  $-   $- 
v3.20.1
Net Loss Per Share (Tables)
12 Months Ended
Dec. 31, 2019
Loss per common share:  
Schedule of basic and diluted for net loss per share
(In thousands, except per share amounts)  Years ended December 31, 
   2019   2018 
BASIC AND DILUTED        
Weighted average number of common shares outstanding   8,844    5,884 
           
Net loss attributable to Neonode Inc.  $(5,298)  $(3,060)
           
Net loss per share basic and diluted  $(0.60)  $(0.52)
v3.20.1
Nature of the Business and Operations (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
Dec. 28, 2018
Mar. 31, 2017
Dec. 31, 2019
Dec. 31, 2018
Aug. 31, 2017
Nature of the Business and Operations (Textual)          
Net loss (including noncontrolling interests)     $ (5,298) $ (3,060)  
Accumulated deficit     (190,520) (185,222)  
Net cash used in operating activities     (3,517) (2,859)  
Net proceeds from issuance of common stock     $ 36 $ 4,620  
Shelf registration statement, expire date   Mar. 24, 2020      
Aggregate of common stock offering price   $ 20,000      
Percentage of beneficial owner     50.00%    
Securities Purchase Agreement [Member]          
Nature of the Business and Operations (Textual)          
Issuance of common stock 2,940,767        
Net proceeds from issuance of common stock $ 4,600        
Shares price per share $ 1.60       $ 10.00
Purchased common stock in private placement $ 2,000        
Percentage of beneficial owner 18.00%        
Common stock at an exercise price         $ 20.00