Neonode Inc.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

1. Organization and Summary of Significant Accounting Policies

Basis of Presentation and Preparation

The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Neonode Inc. and its wholly owned subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared by us, pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally contained in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form10-K for the fiscal year ended* December 31, 2025*.

Recently Issued Accounting Pronouncement Adopted

In* July 2025,the FASB issued ASU2025*-05, Financial Instruments – Credit Losses (Topic326*): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU2025*-05"), which amends ASC326-20 to provide a practical expedient for all entities when estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC606. The practical expedient assumes that current conditions as of the balance sheet date donot change for the remaining life of the asset. ASU2025-05 is effective for fiscal years beginning after* December 15, 2025and interim periods within those fiscal years, with early adoption permitted, and should be applied on a prospective basis. The adoption didnot* have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Pending Adoption

In* December 2025,the FASB issued ASU2025*-12, Codification Improvements ("ASU2025-12"). ASU2025-12 makes incremental improvements to the Accounting Standards Codification and U.S. GAAP. This guidance is effective for annual reporting periods beginning after* December**15,* 2026 and interim reporting periods within those annual periods. Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.

In* December 2025,the FASB issued ASU2025*-11, Interim Reporting (Topic270*): Narrow-Scope Improvements* (“ASU2025-11”). The amendments clarify and reorganize existing interim reporting guidance, including the scope of Topic270 and interim disclosure requirements, and introduce a disclosure principle requiring entities to disclose material events or changes occurring since the most recent annual reporting period. ASU2025-11 is effective for interim reporting periods within annual reporting periods beginning after* December 15, 2027.*Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.

In* September 2025,the FASB issued ASU2025*-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic350*-40): Targeted Improvements to the Accounting for Internal-Use Software*(“ASU2025-06”), which aims to modernize financial reporting by updating how entities recognize and disclose costs incurred for software developed for internal use. ASU2025-06 is effective for fiscal years beginning after* December 15, 2027,*including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of the adoption of this ASU on our consolidated financial statements.

In* November 2024,the FASB issued ASU2024*-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic220*-40): Disaggregation of Income Statement Expenses*("ASU2024-03"), requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU2024-03 is effective for fiscal years beginning after* December 15, 2026,and for interim periods beginning after December 15, 2027,with early adoption permitted. We are currently evaluating the impact of adopting ASU2024*-03.

Foreign Currency Translation and Transaction Gains and Losses

The functional currency of our foreign subsidiaries is the applicable local currency, the Swedish Krona, the Japanese Yen and the South Korean Won. The translation from Swedish Krona, Japanese Yen and South Korean Won to U.S. Dollars is performed for balance sheet accounts using current exchange rates in effect at the condensed consolidated balance sheet date and for income statement accounts using a weighted-average exchange rate during the period. Gains or (losses) resulting from translation are included as a separate component of accumulated other comprehensive loss. Foreign currency translation gain (loss) was $24,000 and $45,000 and $(55,000) and $(189,000) during thethree andsix months ended* June 30, 2026and2025*, respectively. Loss resulting from foreign currency transactions are included in general and administrative expenses in the accompanying condensed consolidated statements of operations and were $(2,000) and $(3,000) and $(12,000) and $68,000 during thethree andsix months ended* June 30, 2026and2025*, respectively.

Liquidity

We have incurred significant operating losses and negative cash flows from operations since our inception. The Company incurred net loss for combined continuing and discontinued operations of approximately $2.1 million and $4.0 million and $1.9 million and $3.6 million for thethree andsix months ended* June 30, 2026and2025*, respectively and had an accumulated deficit of approximately $219.6 million and $215.6 million as of* June 30, 2026* and* December 31, 2025*, respectively. In addition, operating activities used cash of approximately $4.0 million and $3.1 million for thesix months ended* June 30, 2026and2025*, respectively.

The condensed consolidated financial statements included in this report have been prepared on a going concern basis, which contemplates continuity of operations and the realization of assets and the repayment of liabilities in the ordinary course of business.

Management has prepared an operating plan and believes that the Company has sufficient cash to meet its obligations as they come due for a year from the date the condensed consolidated financial statements were issued.

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Concentration of Credit and Business Risks

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

As of* June 30, 2026*, four of our customers represented approximately 95.7% of our consolidated accounts receivable and unbilled revenues.

As of* December 31, 2025*, four of our customers represented approximately 95.4% of our consolidated accounts receivable and unbilled revenues.

Customers who accounted for10.0% or more of our net revenues during thethree months ended* June 30, 2026* are as follows:

Customers who accounted for10.0% or more of our net revenues during thesix months ended* June 30, 2026* are as follows:

Customers who accounted for10.0% or more of our net revenues during thethree months ended* June 30, 2025* are as follows:

Customers who accounted for10.0% or more of our net revenues during thesix months ended* June 30, 2025* are as follows:

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Revenues

The following tables present the net revenues distribution by geographical area and market (in thousands):

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Contract Balances

Timing of revenue recognition** may** differ from the timing of invoice and receipt of consideration. We record a receivable or unbilled revenue when we have an unconditional right to receive consideration from customers. Contract assets represent revenue recognized for performance to date when the right to consideration is conditional on something other than the passage of time. We record contract liabilities when we receive prepayments or upfront payments ahead of performance.

The following table presents our accounts receivable, net and contract liabilities (in thousands):

Payment terms and conditions vary by the type of contract; however, payments generally occur30-60 days after invoicing for license fees. Where revenue recognition timing differs from invoice timing, we have determined that our contracts donot include a significant financing component. Applying the practical expedient in Topic606, the Company doesnot assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays isone year or less. Our intent is to provide our customers with consistent invoicing terms for the convenience of our customers,not to provide financing to our customers.

Contract Liabilities

Contract liabilities (deferred revenues) consist primarily of prepayments for license fees, and other services that we have been paid in advance. We earn the revenue when we transfer control of the service. Deferred revenues* may*also include upfront payments for consulting services to be performed in the future, such as non-recurring engineering services.

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

During thethree andsix months ended* June 30, 2026and2025*, the Company recognized revenues of approximately $43,000 and $27,000 and $25,000 andzero respectively, related to contract liabilities outstanding at the beginning of the period.

Income Taxes

We recognize deferred tax liabilities and assets for the expected future tax consequences of items that have been included in the condensed consolidated financial statements or tax returns. We estimate income taxes based on rates in effect in each of the jurisdictions in which we operate. Deferred income tax assets and liabilities are determined based upon differences between the financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The realization of deferred tax assets is based on historical tax positions and expectations about future taxable income. Valuation allowances are recorded against net deferred tax assets when, in our opinion, realization is uncertain based on the “more likely thannot” criteria of the accounting guidance.

Based on the uncertainty of future pre-tax income, we fully reserved our net deferred tax assets as of* June 30, 2026* and* December 31, 2025*. 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 or benefit from income taxes represents the net change in deferred tax amounts, plus income taxes paid or payable for the current period.

We follow U.S. GAAP related accounting for uncertainty in income taxes, which provisions include atwo-step approach to recognizing, de-recognizing and measuring uncertainty in income taxes. As a result, we didnot recognize a liability for unrecognized tax benefits. As of* June 30, 2026* and* December 31, 2025*, we hadno unrecognized tax benefits.

On* July 4, 2025,new U.S tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or the "OBBBA") which makes permanent many of the tax provisions enacted in2017* as part of the Tax Cuts and Jobs Act that were set to expire at the end of2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, but many are generallynot effective until2026. The enactment of the OBBBA doesnot have a material impact on our results from operations for the current period nor do we expect the OBBBA to have a material impact on our results from operations in future periods.

2. Discontinued Operations

During thefourth quarter of2023 the Company decided to phase out the product business and as a consequence terminate production at the Pronode Technologies AB facilities in Kungsbacka, Sweden. Subsequently, we commenced the phase out of our TSM product business during thefirst quarter of2024 through licensing of the TSM technology to strategic partners or outsourcing. In* May 2024,we stopped producing TSMs and started to shut down the factory. The facility lease terminated as of September 30, 2024and wasnot* renewed.

The Company concluded that the termination of TSM manufacturing met the criteria for discontinued operations. As a result, this business has been reclassified to discontinued operations in these condensed consolidated financial statements for all periods presented.

Assets and Liabilities of Discontinued Operations

Assets and liabilities of discontinued operations are presented separately in the condensed consolidated balance sheets for all periods presented. On* June 30, 2026* and* December 31, 2025*, these balances consisted of assets and liabilities of the Company’s Products business.

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The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the assets and liabilities of discontinued operations as presented on the Company’s condensed consolidated balance sheets (in thousands):

Income (Loss) from Discontinued Operations

Discontinued operations for thethree andsix months ended* June 30, 2026and2025*, respectively, consists of results from the Company’s products business.

The following table provides details about the major classes of line items constituting “Income (loss) from discontinued operations” as presented on the Company’s condensed consolidated statements of operations (in thousands):

Cash Flows Information

There wereno amounts recorded for depreciation, amortization, capital expenditures or significant operating and investing noncash items of discontinued operations for thethree andsix months ended* June 30, 2026and2025*, respectively.

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3. Stockholders’** Equity**

At-the-Market Facility

On* June 4, 2024,we entered into an At The Market Offering Agreement (the “Ladenburg Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”) with respect to an “at the market” offering program (the “Ladenburg ATM Facility”), under which we may,*from time to time, in our sole discretion, issue and sell through Ladenburg, acting as agent or principal, up to approximately $10 million of shares of our common stock.

Pursuant to the Ladenburg Sales Agreement, we* maysell the shares through Ladenburg by any method permitted that is deemed an “at the market” offering as defined in Rule415* under the Securities Act. Ladenburg will use commercially reasonable efforts consistent with its normal trading and sales practices to sell the shares from time to time, based upon instructions from us (including any price or size limits or other customary parameters or conditions we* may*impose). We will pay Ladenburg a commission of 3.0% of the gross sales price per share sold under the Ladenburg Sales Agreement.

We arenot obligated to sell any shares under the Ladenburg Sales Agreement. The offering of shares pursuant to the Ladenburg Sales Agreement will terminate upon the earlier to occur of (i) the issuance and sale, through Ladenburg, of all of the shares of our common stock subject to the Ladenburg Sales Agreement and (ii) termination of the Ladenburg Sales Agreement in accordance with its terms.

4. Commitments and Contingencies

Legal

The Company is subject to legal proceedings and claims that* mayarise in the ordinary course of business. The Company isnot* aware of any pending or threatened litigation matters at this time that would have a material impact on the operations of the Company.

5. Net Loss per Share, Loss per Share from Continuing Operations and Income per Share from Discontinued Operations

Basic net loss per share of common stock for thethree andsix months ended* June 30, 2026and2025* was computed by dividing the net loss attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock outstanding. Basic loss per share of common stock from continuing operations for thethree andsix months ended* June 30, 2026and2025* was computed by dividing the loss from continuing operations attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock outstanding. Basic income per share of common stock from discontinued operations for thethree andsix months ended* June 30, 2026and2025* was computed by dividing the income from discontinued operations attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock outstanding. Diluted loss per share of common stock is computed by dividing net loss attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding excluding potential common stock equivalents that are anti-dilutive. Diluted loss per share of common stock from continuing operations is computed by dividing loss from continuing operations attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding excluding potential common stock equivalents that are anti-dilutive. Diluted income per share of common stock from discontinued operations is computed by dividing income from continuing operations attributable to common stockholders of the Company for the relevant period by the weighted average number of shares of common stock and common stock equivalents outstanding excluding potential common stock equivalents that are anti-dilutive.

The Company hadno potential common stock equivalents for thethree andsix months ended* June 30, 2026and2025*, respectively.

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6. Segment Information

The Company operates asone operating segment. Our chief operating decision maker (“CODM”) is our Chief Executive Officer, who reviews financial information presented on a consolidated basis. The CODM uses consolidated operating loss and net loss to assess financial performance and allocate resources. These financial metrics are used by the CODM to make key operating decisions, such as the allocation of budget between cost of revenues, research and development, sales and marketing, and general and administrative expenses.

The following table presents key financial information with respect to the Company’s single operating segment (in thousands):

The following table presents the long-lived assets property and equipment and right-of-use assets by geographic area (in thousands):

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We report revenues from external customers based on the country where the customer is located. The following table presents net revenues by country (in thousands):

7. Subsequent Events

No subsequent events have occurred that would require recognition in the condensed consolidated financial statements or disclosure in the notes thereto.

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