8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 15, 2010

NEONODE INC.

(Exact name of issuer of securities held pursuant to the plan)

Commission File Number 0-8419

Delaware	94-1517641
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

Linnegatan 89, SE-115 23 Stockholm, Sweden&

651 Byrdee Way, Lafayette, CA. 94549

(Address of principal executive offices, including Zip Code)

Registrant’s telephone number, including area code:

+46 8 667 17 17 — Sweden

1 925 768 0620 — USA

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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TABLE OF CONTENTS

Item 1.01                      Entry into a Material Definitive Agreement

Item 2.03                      Creation of a Direct Financial Obligation

Item 3.02                      Unregistered Sales of Equity Securities

Item 9.01                      Financial Statements and Exhibits

Signatures

Exhibit Index

Ex-10.1                      Form of Amendment to Convertible Note Agreement (Due Date Extension and Warrant Exercise)

Ex-10.2                      Form of Amendment to Convertible Note Agreement (Extension of Convertible Notes Due Date)

Ex-10.3                      Form of Common Stock Purchase Warrant

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Item 1.01.  Entry into a Material Definitive Agreement.

Background: The Convertible Note Agreements

During the period from September 2009 through December 2009, the Registrant entered into convertible note agreements (each a “Convertible Note Agreement”) with several private lenders including, Iwo Jima SARL, a company controlled by the Registrant’s Chairman and Chief Executive officer, Mr. Per Bystedt (the “September 2009 Lenders”) whereby the September 2009 Lenders lent the Registrant an aggregate amount of $987,000 (the “September 2009 Loan Amount”).  The Registrant issued to the September 2009 Lenders (a) convertible notes bearing interest at a rate of 7% per annum (the “Convertible Notes”) that are convertible, at the holder’s option, at a conversion price of $0.02 per share, and (b) three-year common stock purchase warrants with an exercise price of $0.0 4 per share.  The September 2009 transaction and the Convertible Note Agreement were described in more detail in the Registrant’s Current Report on Form 8-K filed with the SEC on September 14, 2009.

During the period from January 2010 through May 2010, the Registrant entered into additional Convertible Note Agreements, and issued additional Convertible Notes and three-year common stock purchase warrants relating thereto, with several private lenders, including Per Bystedt and Iwo Jima SARL, and Davisa Ltd, a company controlled by a member of the Board of Directors of our wholly owned subsidiary, Neonode Technologies AB, Mr. Mats Dahlin (the “March 2010 Lenders”, and together with the September 2009 Lenders, the “Lenders”).  The March 2010 Lenders lent to the Registrant an aggregate amount of $1,800,000 (the “March 2010 Loan Amount”).  The Convertible Notes and the warrants from the March 2010 transaction contain substantially similar terms as the Convertible Notes and w arrants from the September 2009 transaction.  The March 2010 transaction was described in more detail in the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2010 and in the Registrant’s Annual Report on Form 10-K/A filed with the SEC on May 12, 2010.

Current Amendments of Convertible Note Agreements

On October 15, 2010, the Registrant entered into two different types of amendments to the Convertible Note Agreements.  All of the Lenders were provided with an opportunity to choose the type of amendment that they wished to execute with the Registrant.  The first form of amendment (i) extended the due date of the Convertible Note from December 31, 2010 to June 30, 2011;(ii) provided for the exercise of the outstanding warrants at a discounted exercise price of $0.035 per share, instead of the original exercise price of $0.04, and (iii) issued new three-year common stock purchase warrants, with an exercise price of $0.055 per share, for each warrant exercised at the discounted exercise price (the “Replacement Warrants”).  Pursuant to this amendment, Lenders exercised an aggregate of 69,17 9,409 outstanding warrants at the discounted exercise price of $0.035 per share, for an aggregate investment of $2,384,554 in the Registrant, and the Registrant issued Replacement Warrants for the purchase of an aggregate of 69,179,409 restricted shares of common stock of the Registrant.

The second form of amendment simply extended the due date of the Convertible Note from December 31, 2010 to June 30, 2011, and did not involve the exercise or issuance of warrants.

A copy of the form of the amendment with those Lenders who extended the Convertible Note due date and who exercised their warrants at the discounted exercise price is attached hereto as Exhibit 10.1 and is incorporated herein by reference.  A copy of the form of the amendment with those Lenders who only extended the Convertible Note due date is attached hereto as Exhibit 10.2 and is incorporated herein by reference.  A copy of the form of the Common Stock Purchase Warrant for the Replacement Warrants is attached hereto as Exhibit 10.3 and is incorporated herein by reference.  The foregoing descriptions of the amendments and the Replacement Warrants are qualified in their entirety by reference to the full text of the documents attached to this Form 8-K.

The Registrant issued the Replacement Warrants under the exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the “Securities Act”).  The issuance of shares of the Registrant’s common stock pursuant to the terms of the Amendment and the Replacement Warrants are exempt from registration under Section 4(2) of the Securities Act, and regulations promulgated thereunder.  None of these transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and the Lenders had adequate access, through their relationships with the Registrant, to information about the Registrant.

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The shares of common stock to be issued upon exercise of the Replacement Warrants will not be registered under the Securities Act, or any state securities laws, and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of the Registrant

The information provided in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.

Item 3.02 Unregistered Sales of Securities

The information provided in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 3.02.

Item 9.01       Financial Statements and Exhibits.

Exhibit No.	Description
Exhibit 10.1	Form of Amendment to Convertible Note Agreement (Due Date Extension and Warrant Exercise).
Exhibit 10.2	Form of Amendment to Convertible Note Agreement (Extension of Convertible Notes Due Date).
Exhibit 10.3	Form of Common Stock Purchase Warrant.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NEONODE, INC.

By:  /s/ David W. Brunton

Name:  David W. Brunton

Title:    Chief Financial Officer

 Date: October 18, 2010

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EX-10.1

EXHIBIT 10.1

AMENDMENT

TO

CONVERTIBLE NOTE AGREEMENT

THIS AMENDMENT TO CONVERTIBLE NOTE AGREEMENT (the “Amendment”) is entered into as the 27th day of September, 2010, by and between Neonode, Inc., a Delaware Company (the “Company”), and the entity set forth on the signature page below (the “Investor”).

WHEREAS, the Company and the Investor entered into a Convertible Note Agreement dated as of _______ ___, 2009 (the “Agreement”); and

WHEREAS, pursuant to the Agreement (a) the Investor provided the Company with a convertible loan in amount set forth in Exhibit 1 hereto (the “Convertible Loan”); (b) the Company delivered to the Investor a convertible note in the amount of the Convertible Loan (the “Note”); and (c) the Company issued to the Investor the number of warrants set forth in Exhibit 1 hereto (the “ Current Warrants”) to purchase fully-paid and non-assessable restricted shares of common stock of the Company, at a price of $0.04 per share (the “Warrant Shares”); and

WHEREAS, the Company and the Investor wish to amend the terms of the Agreement in accordance with the terms and conditions set forth herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.             Definitions.

All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.

2.             The Note.

2.1           Section 1.4 of the Agreement shall be amended such that the Due Date for the Note shall be extended to and including June 30, 2011.

2.2           Exhibit B of the Agreement (the “Note”) shall be amended such that the “Maturity Date” in the exhibit shall be June 30, 2011.

3.             Exercise of Current Warrants.

3.1           Simultaneously with the execution of this Amendment, the Investor shall complete and deliver to the Company a warrant exercise notice/Form of Subscription in the form attached hereto as Exhibit 2, for the exercise of the number of Current Warrants and the purchase of the number of Warrants Shares set forth in Exhibit 1, at a discounted exercise price of $0.035 per share.

3.2           Simultaneously with the execution of this Amendment, the Investor shall deliver to the Company the aggregate warrant exercise price in the amount set forth in Exhibit 1 hereto for the number Warrant Shares being purchased hereunder.

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4.             Grant of Replacement Warrants.

Simultaneously with the execution of this Amendment, the Company shall deliver to the Investor a common stock purchase warrant between the Investor and the Company substantially in the form attached hereto as Exhibit 3,providing the Investor with warrants to purchase fully-paid and non-assessable restricted shares of common stock of the Company, at a price of $0.055 per share (the “Replacement Warrants”).  The number of Replacement Warrants shall be equal to the number of Current Warrants being exercised hereunder, as set forth in Exhibit 1 hereto.

5.             Information on the Company

The Investor has been furnished with or has had access at the EDGAR Website of the SEC to the Company's Form 10-K filed on May 21, 2010 for the fiscal year ended December 31, 2009 and the financial statements included therein for the year ended December 31, 2009 together with all subsequent filings made with the SEC available at the EDGAR website ("Reports").  In addition, the Investor may have received in writing from the Company such other information concerning its operations, financial condition and other matters as such Investor has requested in writing, identified thereon as "Other Written Information" and considered all factors such Investor deems material in deciding on entering into this Amendment.

6.             Representations of the Company.

The representations of the Company set forth in Section 5 of the Agreement are restated by the Company and incorporated herein by reference; provided, however, that the Company does not at the present time have sufficient authorized shares of common stock for issuance upon the conversion of all of the Notes and upon the exercise of all of the Current Warrants and Replacement Warrants.  The Company is currently in the process of increasing its authorized shares of common stock from 698,000,000 to 848,000,000 to ensure that the Company has sufficient authorized shares of common stock for issuance upon the conversion of the Notes and the exercise of the Current Warrant and the Replacement Warrants.

7.             Representations of the Investor.

The representations of the Investor set forth in Section 6 of the Agreement are restated by the Investor and incorporated herein by reference.

8.             Miscellaneous.

8.1           Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Amendment and the intentions of the parties as reflected thereby.

8.2           This Amendment shall be governed by and construed according to the laws of the State of New York, without regard to the conflict of laws provisions thereof.  Any action brought by either party against the other concerning the transactions contemplated by this Amendment shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York

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8.3           Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto.

8.4           Except as specifically amended by this Amendment, the Agreement shall remain in full force and effect.  In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms and conditions of this Amendment shall govern and control.  This Amendment, along with the Agreement, constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof and supersede any prior agreement, understanding, or contract, written or oral, with respect to the subject matter hereof and thereof.

8.5           No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Amendment, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, either under this Amendment or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

8.6           If any provision of this Amendment is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Amendment and the remainder of this Amendment shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Amendment shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

8.7           This Amendment may be executed in counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute but one and the same instrument

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

The Company	The Investor
Name:	Name:
Title:	Title:
Date:	Date:

List of Exhibits:

Exhibit 1:                      Investor Details

Exhibit 2:                      Form of Subscription – Current Warrants

Exhibit 3:                      Common Stock Purchase Warrant – Replacement Warrants

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EXHIBIT 1

INVESTOR DETAILS

Investor Name Address

Amount of Convertible Loan	Number of Current Warrants	Current Warrants Being  Exercised – Warrant Shares  Issuable upon Exercise	Current Warrants Discounted Exercise Price	Aggregate Warrant Exercise Price	Number of Replacement Warrants
			$0.035 per Share

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EXHIBIT 2

FORM OF SUBSCRIPTION – CURRENT WARRANTS

FORM OF SUBSCRIPTION

(to be signed on exercise of Current Warrant)

TO:  NEONODE INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase:

______________        ________ shares of the Common Stock covered by such Warrant.

The undersigned herewith makes payment of the full purchase price for such shares, at a price per share of $0.035, for a total payment of $___________.  Such payment takes the form of:

________________________U.S. dollars ($__________) in lawful money of the United States.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to ______________ whose address is __________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an exemption from registration under the Securities Act.

Dated:___________________  __________________________ (Signature must conform to name of holder as specified on the face of the Warrant)     __________________________  __________________________ (Address)

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EXHIBIT 3

COMMON STOCK PURCHASE WARRANT – REPLACEMENT WARRANTS

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EX-10.2

EXHIBIT 10.2

AMENDMENT

TO

CONVERTIBLE NOTE AGREEMENT

THIS AMENDMENT TO CONVERTIBLE NOTE AGREEMENT (the “Amendment”) is entered into as the ___ day of September, 2010, by and between Neonode, Inc., a Delaware Company (the “Company”), and the entity set forth on the signature page below (the “Investor”).

WHEREAS, the Company and the Investor entered into a Convertible Note Agreement dated as of _______ ___, 2009 (the “Agreement”); and

WHEREAS, pursuant to the Agreement (a) the Investor provided the Company with a convertible loan in amount set forth in Exhibit 1 hereto (the “Convertible Loan”); (b) the Company delivered to the Investor a convertible note in the amount of the Convertible Loan (the “Note”); and (c) the Company issued to the Investor the number of warrants set forth in Exhibit 1 hereto (the “ Current Warrants”) to purchase fully-paid and non-assessable restricted shares of common stock of the Company, at a price of $0.04 per share (the “Warrant Shares”); and

WHEREAS, the Company and the Investor wish to amend the terms of the Agreement in accordance with the terms and conditions set forth herein;

NOW, THEREFORE, the parties hereto hereby agree as follows:

1.           Definitions.

All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings ascribed to such terms in the Agreement.

2.           The Note.

2.1           Section 1.4 of the Agreement shall be amended such that the Due Date for the Note shall be extended to and including June 30, 2011.

2.2           Exhibit B of the Agreement (the “Note”) shall be amended such that the “Maturity Date” in the exhibit shall be June 30, 2011.

3.           Miscellaneous.

3.1           Each of the parties hereto shall perform such further acts and execute such further documents as may reasonably be necessary to carry out and give full effect to the provisions of this Amendment and the intentions of the parties as reflected thereby.

3.2           This Amendment shall be governed by and construed according to the laws of the State of New York, without regard to the conflict of laws provisions thereof.  Any action brought by either party against the other concerning the transactions contemplated by this Amendment shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York

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3.3           Except as otherwise expressly limited herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto.

3.4           Except as specifically amended by this Amendment, the Agreement shall remain in full force and effect.  In the event of any inconsistency or conflict between the Agreement and this Amendment, the terms and conditions of this Amendment shall govern and control.  This Amendment, along with the Agreement, constitute the full and entire understanding and agreement between the parties with regard to the subject matters hereof and thereof and supersede any prior agreement, understanding, or contract, written or oral, with respect to the subject matter hereof and thereof.

3.5           No delay or omission to exercise any right, power, or remedy accruing to any party upon any breach or default under this Amendment, shall be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, either under this Amendment or by law or otherwise afforded to any of the parties, shall be cumulative and not alternative.

3.6           If any provision of this Amendment is held by a court of competent jurisdiction to be unenforceable under applicable law, then such provision shall be excluded from this Amendment and the remainder of this Amendment shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms; provided, however, that in such event this Amendment shall be interpreted so as to give effect, to the greatest extent consistent with and permitted by applicable law, to the meaning and intention of the excluded provision as determined by such court of competent jurisdiction.

3.7           This Amendment may be executed in counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute but one and the same instrument

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their duly authorized representatives.

The Company	The Investor
Name:	Name:
Title:	Title:
Date:	Date:

List of Exhibits:

Exhibit 1:                      Investor Details

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EXHIBIT 1

INVESTOR DETAILS

Investor Name Address Amount of Convertible Loan No. of Warrants

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EX-10.3

EXHIBIT 10.3

NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SE CURED BY THE SECURITIES.

Right to Purchase __________ shares of Common Stock of Neonode Inc. (subject to adjustment as provided herein)

COMMON STOCK PURCHASE WARRANT

No. 2010-R___  Issue Date: ________________, 2010

NEONODE INC., a corporation organized under the laws of the State of Delaware (the “Company”), hereby certifies that, for value received, ______________ or its assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company at any time commencing six (6) months after the Issue Date until 5:00 p.m., E.S.T on ___________, 2013, the third (3rd) anniversary of the Issue Date (the “Expiration Date”), up to _____________________  (________) fully paid and nonassessable shares of Common Stock at a per share purchase price of $0.055.  The purchase price per share, as adjusted from time to time as herein provided, is referred to herein as the "Purchase Price." & #160;The number and character of such shares of Common Stock and the Purchase Price are subject to adjustment as provided herein.  Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Convertible Note Agreement (the “Convertible Note Agreement”), dated as of ___________________, 2010, entered into by the Company and certain of the Holders.

As used herein the following terms, unless the context otherwise requires, have the following respective meanings:

(a)           The term “Company” shall include Neonode Inc. and any corporation which shall succeed or assume the obligations of Neonode Inc. hereunder.

(b)           The term “Common Stock” includes (a) the Company's Common Stock, $0.001 par value per share, as authorized on the date of the Convertible Note Agreement, and (b) any other securities into which or for which any of the securities described in (a) may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale of assets or otherwise.

(c)           The term “Other Securities” refers to any stock (other than Common Stock) and other securities of the Company or any other person (corporate or otherwise) which the holder of the Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to Section 3 or otherwise.

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(d)           The term “Warrant Shares” shall mean the Common Stock issuable upon exercise of this Warrant.

1.           Exercise of Warrant.

1.1.           Number of Shares Issuable upon Exercise.  From and after the Issue Date through and including the Expiration Date, the Holder hereof shall be entitled to receive, upon exercise of this Warrant in whole in accordance with the terms of subsection 1.2 or upon exercise of this Warrant in part in accordance with subsection 1.3, shares of Common Stock of the Company, subject to adjustment pursuant to Section 3.

1.2.           Full Exercise.  This Warrant may be exercised in full by the Holder hereof by delivery of an original or facsimile copy of the form of subscription attached as Exhibit A hereto (the “Subscription Form”) duly executed by such Holder and delivery within two days thereafter of payment, in cash, wire transfer or by certified or official bank check payable to the order of the Company, in the amount obtained by multiplying the number of shares of Common Stock for which this Warrant is then exercisable by the Purchase Price then in effect.  The original Warrant is not required to be surrendered to the Company until it has been fully exercised.

1.3.           Partial Exercise.  This Warrant may be exercised in part (but not for a fractional share) by delivery of a Subscription Form in the manner and at the place provided in subsection 1.2 except that the amount payable by the Holder on such partial exercise shall be the amount obtained by multiplying (a) the number of whole shares of Common Stock designated by the Holder in the Subscription Form by (b) the Purchase Price then in effect.  On any such partial exercise provided the Holder has surrendered the original Warrant, the Company, at its expense, will forthwith issue and deliver to or upon the order of the Holder hereof a new Warrant of like tenor, in the name of the Holder hereof or as such Holder (upon payment by such Holder of any applicable transfer taxes) may request, the whole number of shares of Common Stock for which such Warrant may still be exercised for the balance of.

1.4.           Fair Market Value. Fair Market Value of a share of Common Stock as of a particular date (the "Determination Date") shall mean:

(a)           If the Company's Common Stock is traded on an exchange or is quoted on the NASDAQ Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or the American Stock Exchange, LLC, then the average of the closing or last sale prices, respectively, reported for the ten trading days immediately preceding the Determination Date;

(b)           If the Company's Common Stock is not traded on an exchange or on the NASDAQ Global Market, Nasdaq Global Select Market, the NASDAQ Capital Market, the New York Stock Exchange or the American Stock Exchange, LLC, but is traded in the over-the-counter market, then the average of the closing bid price reported for the ten trading days immediately preceding the Determination Date;

(c)           Except as provided in clause (d) below and Section 2.1, if the Company's Common Stock is not publicly traded, then as the Holder and the Company agree, or in the absence of such an agreement, by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided; or

(d)           If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company's charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.

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1.5.           Company Acknowledgment. The Company will, at the time of the exercise of the Warrant, upon the request of the Holder hereof acknowledge in writing its continuing obligation to afford to such Holder any rights to which such Holder shall continue to be entitled after such exercise in accordance with the provisions of this Warrant. If the Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder any such rights.

1.6.           Trustee for Warrant Holders. In the event that a bank or trust company shall have been appointed as trustee for the Holder of the Warrants pursuant to Subsection 3.2, such bank or trust company shall have all the powers and duties of a warrant agent (as hereinafter described) and shall accept, in its own name for the account of the Company or such successor person as may be entitled thereto, all amounts otherwise payable to the Company or such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

1.7           Delivery of Stock Certificates, etc. on Exercise. The Company agrees that the shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the Holder hereof as the record owner of such shares as of the close of business on the date on which delivery of a Subscription Form shall have occurred and payment made for such shares as aforesaid. As soon as practicable after the exercise of this Warrant in full or in part, and in any event within three (3) business days thereafter (“Warrant Share Delivery Date”), the Company at its expense (including the payment by it of any applicable issue taxes) will cause to be issued in the name of and delivered to the Hold er hereof, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance with applicable securities laws, a certificate or certificates for the number of duly and validly issued, fully paid and non-assessable shares of Common Stock (or Other Securities) to which such Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such Holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market Value of one full share of Common Stock, together with any other stock or other securities and property (including cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1 or otherwise.

2.           Cashless Exercise.

(a)           Commencing six months after the Issue Date, payment upon exercise may be made at the option of the Holder either in (i) cash, wire transfer or by certified or official bank check payable to the order of the Company equal to the applicable aggregate Purchase Price, (ii) by delivery of Common Stock issuable upon exercise of the Warrants in accordance with Section (b) below or (iii) by a combination of any of the foregoing methods, for the number of Common Stock specified in such form (as such exercise number shall be adjusted to reflect any adjustment in the total number of shares of Common Stock issuable to the holder per the terms of this Warrant) and the holder shall thereupon be entitled to receive the number of duly authorized, validly iss ued, fully-paid and non-assessable shares of Common Stock (or Other Securities) determined as provided herein.

(b)           Subject to the provisions herein to the contrary, if the Fair Market Value of one share of Common Stock is greater than the Purchase Price (at the date of calculation as set forth below), in lieu of exercising this Warrant for cash, the holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being cancelled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Subscription Form in which event the Company shall issue to the holder a number of shares of Common Stock computed using the following formula:

X=Y (A-B)

          A

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Where  X=   the number of shares of Common Stock to be issued to the holder

Y= the number of shares of Common Stock purchasable under the Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation)

A= the average of the closing sale prices of the Common Stock for the five (5) Trading Days immediately prior to (but not including) the Exercise Date, or Fair Market Value, whichever is less

B= Purchase Price (as adjusted to the date of such calculation)

For purposes of Rule 144 promulgated under the 1933 Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued pursuant to the Convertible Note Agreement.

3.           Adjustment for Reorganization, Consolidation, Merger, etc.

3.1.           Fundamental Transaction.  If, at any time while this Warrant is outstanding, (A) the Company  effects any merger or  consolidation  of the Company with or into another entity, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions,  (C) any tender offer or exchange offer (whether by the Company or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, (D) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more persons or entities whereby such other persons or entities acquire more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by such other persons or entities making or party to, or associated or affiliated with the other persons or entities making or party to, such stock purchase agreement or other business combination), (E) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the 1934 Act) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly or indirectly, of 50% of the aggregate Common Stock of the Company, or (F) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock&# 160;is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental  Transaction"), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder, (a) upon exercise of this Warrant, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the "Alternate Consideration") receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exer cisable immediately prior to such event or (b) if the Company is acquired in (1) a transaction where the consideration paid to the holders of the Common Stock consists solely of cash, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the 1934 Act, or (3) a transaction involving a person or entity not traded on a national securities exchange, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market, cash equal to the Black-Scholes Value.  For purposes of any such exercise, the determination of the Purchase Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Purchase Price among the Alternate Consideration in a reasonable manner reflecting t he relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice

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as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to exercise such warrant into Alternate Consideration.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 2.1 and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent
60;transaction analogous to a Fundamental Transaction.  “Black-Scholes Value” shall be determined in accordance with the Black-Scholes Option Pricing Model obtained from the “OV” function on Bloomberg L.P. using (i) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date of  consummation of the applicable Fundamental Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of such request and (iii) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg L.P. determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction.

3.2.           Dissolution.  In the event of any dissolution of the Company following the transfer of all or substantially all of its properties or assets, the Company, prior to such dissolution, shall at its expense deliver or cause to be delivered the stock and other securities and property (including cash, where applicable) receivable by the Holder of the Warrants after the effective date of such dissolution pursuant to this Section 2 to a bank or trust company (a "Trustee") having its principal office in New York, NY, as trustee for the Holder of the Warrants.  Such property shall be delivered only upon payment of the Warrant exercise price.

3.3.           Continuation of Terms.  Upon any reorganization, consolidation, merger or transfer (and any dissolution following any transfer) referred to in this Section 2, this Warrant shall continue in full force and effect and the terms hereof shall be applicable to the Other Securities and property receivable on the exercise of this Warrant after the consummation of such reorganization, consolidation or merger or the effective date of dissolution following any such transfer, as the case may be, and shall be binding upon the issuer of any Other Securities, including, in the case of any such transfer, the person acquiring all or substantially all of the properties or assets of the Company, whet her or not such person shall have expressly assumed the terms of this Warrant as provided in Section 4.  In the event this Warrant does not continue in full force and effect after the consummation of the transaction described in this Section 2, then only in such event will the Company's securities and property (including cash, where applicable) receivable by the Holder of the Warrants be delivered to the Trustee as contemplated by Section 2.2.

4.           Extraordinary Events Regarding Common Stock.  In the event that the Company shall (a) issue additional shares of the Common Stock as a dividend or other distribution on outstanding Common Stock, (b) subdivide its outstanding shares of Common Stock, or (c) combine its outstanding shares of the Common Stock into a smaller number of shares of the Common Stock, then, in each such event, the Purchase Price shall, simultaneously with the happening of such event, be adjusted by multiplying the then Purchase Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the n umber of shares of Common Stock outstanding immediately after such event, and the product so obtained shall thereafter be the Purchase Price then in effect. The Purchase Price, as so adjusted, shall be readjusted in the same manner upon the happening of any successive event or events described herein in this Section 4. The number of shares of Common Stock that the Holder of this Warrant shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise be issuable on such exercise by a fraction of which (a) the numerator is the Purchase Price that would otherwise be in effect, and (b) the denominator is the Purchase Price in effect on the date of such exercise.

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5.           Certificate as to Adjustments.  In each case of any adjustment or readjustment in the shares of Common Stock (or Other Securities) issuable on the exercise of the Warrants, the Company at its expense will promptly cause its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by the Company for any additional shares of Common Stock (or Other Securities) issued or sold or deem ed to have been issued or sold, (b) the number of shares of Common Stock (or Other Securities) outstanding or deemed to be outstanding, and (c) the Purchase Price and the number of shares of Common Stock to be received upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as provided in this Warrant. The Company will forthwith mail a copy of each such certificate to the Holder of the Warrant and any Warrant Agent of the Company (appointed pursuant to Section 10 hereof).

6.           Reservation of Stock, etc. Issuable on Exercise of Warrant; Financial Statements.   The Company will at all times reserve and keep available, solely for issuance and delivery on the exercise of the Warrants, all shares of Common Stock (or Other Securities) from time to time issuable on the exercise of the Warrant.  This Warrant entitles the Holder hereof to receive copies of all financial and other information distributed or required to be distributed to the holders of the Company's Common Stock.

7.           Assignment; Exchange of Warrant.  Subject to compliance with applicable securities laws, this Warrant, and the rights evidenced hereby, may be transferred by any registered holder hereof (a "Transferor"). On the surrender for exchange of this Warrant, with the Transferor's endorsement in the form of Exhibit B attached hereto (the “Transferor Endorsement Form") and together with an opinion of counsel reasonably satisfactory to the Company that the transfer of this Warrant will be in compliance with applicable securities laws, the Company will issue and deliver to or on the order of the Transferor thereof a new Warrant or Warrants of like tenor, in the name of the Transferor and/o r the transferee(s) specified in such Transferor Endorsement Form (each a "Transferee"), calling in the aggregate on the face or faces thereof for the number of shares of Common Stock called for on the face or faces of the Warrant so surrendered by the Transferor.

8.           Replacement of Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender and cancellation of this Warrant, the Company at its expense, twice only, will execute and deliver, in lieu thereof, a new Warrant of like tenor.

9.           Maximum Exercise.  The Holder shall not be entitled to exercise this Warrant on an exercise date in connection with that number of shares of Common Stock which would be in excess of the sum of (i) the number of shares of Common Stock beneficially owned by the Holder and its affiliates on an exercise date, and (ii) the number of shares of Common Stock issuable upon the exercise of this Warrant with respect to which the determination of this limitation is being made on an exercise date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock on such date; provided that the restrictions on exercise set forth in this Section 9 shall not apply in event of completion of a Fundamental Transaction.  For the purposes of the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities 1934 Act, and Rule 13d-3 thereunder.  Subject to the foregoing, the Holder shall not be limited to aggregate exercises which would result in the issuance of more than 4.99%.  The restriction described in this paragraph may be waived, in whole or in part, upon sixty-one (61) days prior notice from the Holder to the Company to increase such percentage to up to 9.99%, but not in excess of 9.99%.  The Holder may decide whether to convert a Investment Amount or exercise this Warrant to achieve an actual 4.99% or up to 9.99% ownership position as described above, but not in excess of 9.99%.

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10.           Warrant Agent.  The Company may, by written notice to the Holder of the Warrant, appoint an agent (a “Warrant Agent”) for the purpose of issuing Common Stock (or Other Securities) on the exercise of this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance, exchange or replacement, as the case may be, shall be made at such office by such Warrant Agent.

11.           Transfer on the Company's Books.  Until this Warrant is transferred on the books of the Company, the Company may treat the registered holder hereof as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.

12.           Notices.   All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:  if to the Company, to: Neonode Inc., 651 Byrdee Way, Lafayette, California, 94549, Attn: Chief Financial Officer, with a copy by telecopier only to: Steve Kronengold, SRK Law Offices, Hamada 12, Rehovot, Israel, Fax: +972-8-936-6000, and (ii) if to the Holder, to the address and telecopier number listed in the records of the Company, or such other address as such party may designate by notice hereunder.

13.           Law Governing This Warrant.  This Warrant shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Holder waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.

NEONODE INC.

By:  

 Name: David W Brunton, CFO

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Exhibit A

FORM OF SUBSCRIPTION

(to be signed only on exercise of Warrant)

TO:  NEONODE INC.

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.____), hereby irrevocably elects to purchase (check applicable box):

__           ________ shares of the Common Stock covered by such Warrant.

__           ________ the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full purchase price for such shares at the price per share provided for in such Warrant, which is $___________.  Such payment takes the form of (check applicable box or boxes)

___           $__________ in lawful money of the United States and/or

___           the cancellation of such portion of the attached Warrant as is exercisable for a total of _______ shares of Common Stock (using a Fair Market Value of $_______ per share for purposes of this calculation); and/ or

___           the cancellation of such number of shares of Common Stock as is necessary, in accordance with the formula set forth in Section 2, to exercise this Warrant with respect to the maximum number of shares of Common Stock purchasable pursuant to the cashless exercise procedure set forth in Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and delivered to _____________________________________________________ whose address is _________________________________________________

_____________________________________.

The undersigned represents and warrants that all offers and sales by the undersigned of the securities issuable upon exercise of the within Warrant shall be made pursuant to registration of the Common Stock under the Securities Act of 1933, as amended (the "Securities Act"), or pursuant to an exemption from registration under the Securities Act.

Dated:
	(Signature must conform to name of holder as specified on the face of the Warrant)
	(Address)

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Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

For value received, the undersigned hereby sells, assigns, and transfers unto the person(s) named below under the heading "Transferees" the right represented by the within Warrant to purchase the percentage and number of shares of Common Stock of NEONODE INC. to which the within Warrant relates specified under the headings "Percentage Transferred" and "Number Transferred," respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to transfer its respective right on the books of NEONODE INC. with full power of substitution in the premises.

Transferees Percentage Transferred Number Transferred

Dated:
	(Signature must conform to name of holder as specified on the face of the warrant)
Signed in the presence of:
(Name)
	(address)
ACCEPTED AND AGREED:
[TRANSFEREE]
	(address)
(Name)

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