Exhibit
      6

    to
      Note
      Purchase Agreement

    


    RISK
      FACTORS

    


    Neonode’s
      operating results are subject to fluctuations, and if Neonode fails to meet
      the
      expectations of securities analysts or investors, our stock price may decrease
      significantly.

     

    Neonode’s
      operating results are difficult to forecast. Its future operating results may
      fluctuate significantly and may not meet its expectations or those of securities
      analysts or investors. If this occurs, the price of our common stock will likely
      decline. Many factors may cause fluctuations in its operating results including,
      but not limited to, the following:

     

    
      	·	
              timely
                introduction and market acceptance of new products and
                services;

            


    

    
      	·	
              changes
                in consumer and enterprise spending
                levels;

            


    

    
      	·	
              quality
                issues with its products;

            


    

    
      	·	
              changes
                in consumer, enterprise and carrier preferences for its products
                and
                services;

            


    

    
      	·	
              loss
                or failure of carriers or other key sales channel
                partners;

            


    

    
      	·	
              competition
                from other mobile telephone or handheld devices or other devices
                with
                similar functionality;

            


    

    
      	·	
              competition
                for consumer and enterprise spending on other
                products;

            


    

    
      	·	
              failure
                by its third party manufacturers or suppliers to meet its quantity
                and
                quality requirements for products or product components on
                time;

            


    

    
      	·	
              failure
                to add or replace third party manufacturers or suppliers in a timely
                manner;

            


    

    
      	·	
              changes
                in terms, pricing or promotional
                program

            


    

    
      	·	
              variations
                in product costs or the mix of products
                sold;

            


    

    
      	·	
              failure
                to achieve product cost and operating expense
                targets;

            


    

    
      	·	
              excess
                inventory or insufficient inventory to meet
                demand;

            


    

    
      	·	
              seasonality
                of demand for some of its products and
                services;

            


    

    
      	·	
              litigation
                brought against us; and

            


    

    
      	·	
              changes
                in general economic conditions and specific market
                conditions.

            


    

     

    Any
      of
      the foregoing factors could have a material adverse effect on its business,
      results of operations and financial condition.

    


    Neonode
      has not been profitable since its inception and anticipates significant
      additional losses. 

    


    Neonode
      Inc. was formed in 2006 as a holding company owning and operating Neonode AB,
      which was formed in 2004, and has been primarily engaged in the business of
      developing and selling mobile phones. Neonode has a limited operating history
      on
      which to base an evaluation of its business and prospects. Neonode’s prospects
      must be considered in light of the risks and uncertainties encountered by
      companies in the early stages of development, particularly companies in new
      and
      rapidly evolving markets. Neonode’s success will depend on many factors,
      including, but not limited to: the growth of mobile telephone usage; the efforts
      of its marketing partners; the level of competition faced by it; and its ability
      to meet customer demand for products and ongoing service. There can be no
      assurance that Neonode will succeed in addressing any or all of these risks,
      and
      the failure to do so would have a material adverse effect on its business,
      operating results and financial condition.

    


    In
      addition, Neonode has experienced substantial net losses in each fiscal period
      since its inception and, as of December 31, 2006, had an accumulated deficit
      of
      $10.2 million. Neonode is continuing to experience net losses. Such net losses
      and accumulated deficit resulted from its lack of substantial revenues and
      the
      significant costs incurred in the development of its products and
      infrastructure. 

    


    Neonode’s
      limited operating history and the emerging nature of its market, together with
      the other risk factors described below, make prediction of its future operating
      results difficult. There can also be no assurance that Neonode will ever achieve
      significant revenues or profitability or, if significant revenues and
      profitability are achieved, that they could be sustained.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Neonode
      will require additional capital to fund its operations, which capital may not
      be
      available on commercially attractive terms or at all.

    


    Neonode
      requires sources of capital in addition to cash on hand to continue operations
      and to implement its strategy. Neonode intends to seek credit line facilities
      from financial institutions and/or additional equity investment. No assurances
      can be given that Neonode would 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, Neonode may be unable to adequately fund its
      business plans and it could have a negative effect on its 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 its common stock and cause the market price to fall
      and
      the issuance of debt securities could impose restrictive covenants that could
      impair its ability to engage in certain business transactions.

     

    If
      Neonode fails to develop and introduce new products and services successfully
      and in a cost effective and timely manner, it will not be able to compete
      effectively and its ability to generate revenues will
      suffer.

     

    Neonode
      operates in a highly competitive, rapidly evolving environment, and its success
      depends on its ability to develop and introduce new products and services that
      its customers and end users choose to buy. If Neonode is unsuccessful at
      developing and introducing new products and services that are appealing to
      its
      customers and end users with acceptable quality, prices and terms, Neonode
      will
      not be able to compete effectively and its ability to generate revenues will
      suffer. 

    


    The
      development of new products and services is very difficult and requires high
      levels of innovation. The development process is also lengthy and costly. If
      Neonode fails to anticipate its end users’ needs or technological trends
      accurately or are unable to complete the development of products and services
      in
      a cost effective and timely fashion, Neonode will be unable to introduce new
      products and services into the market or successfully compete with other
      providers.

     

    As
      Neonode introduces new or enhanced products or integrates new technology into
      new or existing products, Neonode faces risks including, among other things,
      disruption in customers’ ordering patterns, excessive levels of older product
      inventories, delivering sufficient supplies of new products to meet customers’
demand, possible product and technology defects, and a potentially different
      sales and support environment. Premature announcements or leaks of new products,
      features or technologies may exacerbate some of these risks. Its failure to
      manage the transition to newer products or the integration of newer technology
      into new or existing products could adversely affect its business, results
      of
      operations and financial condition.

     

    Complexity
      of Products.

    


    Neonode’s
      products are complex and could have unknown defects or errors, which may give
      rise to claims against Neonode, diminish the Neonode brand or divert Company
      resources from other purposes. Despite testing, new or existing products may
      contain defects, errors, or performance problems when first introduced, when
      new
      versions or enhancements are released, or even after these products have been
      used by our customers for a period of time. These problems could result in
      expensive and time-consuming design modifications or warranty charges, delays
      in
      the introduction of new products or enhancements, significant increases in
      service and maintenance costs, exposure to liability for damages, damaged
      customer relationships and harm to Neonode’s reputation. Any of these problems
      could materially harm results of operations. In addition, increased development
      and warranty costs could be substantial and could adversely affect operating
      margins.

    


    Neonode
      is dependent on third parties to manufacture and supply its products and
      components of its products. 

    


    Neonode’s
      products are built by a limited number of independent manufacturers. Although
      Neonode provides manufacturers with key performance specifications for the
      phones, these manufacturers could: 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          	·	
                  manufacture phones with
                    defects that fail to perform to its specifications;
                    

                


        

      

    

    
      
        
          	
                  ·

                	
                  fail
                    to meet delivery schedules;
                    or

                


        

      

    

    
      
        
          	
                  ·

                	
                  fail
                    to properly service phones or honor warranties.


                


        

      

    

    


    Any
      of
      the foregoing could adversely affect its ability to sell its products and
      services, which, in turn, could adversely affect its revenues, profitability
      and
      liquidity, as well as its brand image.

     

    Neonode may
      become highly dependent on wireless carriers for the success of its
      products.

     

    Neonode’s
      business strategy includes significant efforts to establish relationships with
      international wireless carriers. We cannot assure you that Neonode will be
      successful in establishing new relationships, or maintaining such relationships,
      with wireless carriers or that these wireless carriers will act in a manner
      that
      will promote the success of its multimedia phone products. Factors that are
      largely within the control of wireless carriers, but which are important to
      the
      success of its multimedia phone products, include:

     

    
      	·	
              testing
                of its products on wireless carriers’
networks;

            


    

    
      	·	
              quality
                and coverage area of wireless voice and data services offered by
                the
                wireless carriers;

            


    

    
      	·	
              the
                degree to which wireless carriers facilitate the introduction of
                and
                actively market, advertise, promote, distribute and resell its multimedia
                phone products;

            


    

    
      	·	
              the
                extent to which wireless carriers require specific hardware and software
                features on its multimedia phone to be used on their
                networks;

            


    

    
      	·	
              timely
                build out of advanced wireless carrier networks that enhance the
                user
                experience for data centric services through higher speed and other
                functionality;

            


    

    
      
        	·	
                contractual
                  terms and conditions imposed on them by wireless carriers that,
                  in some
                  circumstances, could limit its ability to make similar products
                  available
                  through competitive carriers in some market
                  segments;

              


      

    

    
      	·	
              wireless
                carriers’ pricing requirements and subsidy programs;
                and

            


    

    
      	·	
              pricing
                and other terms and conditions of voice and data rate plans that
                the
                wireless carriers offer for use with its multimedia phone
                products.

            


    

     

    For
      example, flat data rate pricing plans offered by some wireless carriers may
      represent some risk to its relationship with such carriers. While flat data
      pricing helps customer adoption of the data services offered by carriers and
      therefore highlights the advantages of the data applications of its products,
      such plans may not allow its multimedia phones to contribute as much average
      revenue per user, or ARPU, to wireless carriers as when they are priced by
      usage, and therefore reduces its differentiation from other, non-data devices
      in
      the view of the carriers. In addition, if wireless carriers charge higher rates
      than consumers are willing to pay, the acceptance of its wireless solutions
      could be less than anticipated and its revenues and results of operations could
      be adversely affected.

     

    Wireless
      carriers have substantial bargaining power as Neonode enters into agreements
      with them. They may require contract terms that are difficult for Neonode to
      satisfy and could result in higher costs to complete certification requirements
      and negatively impact its results of operations and financial condition.
      Moreover, Neonode may not have agreements with some of the wireless carriers
      with whom they will do business and, in some cases, the agreements may be with
      third-party distributors and may not pass through rights to Neonode or provide
      Neonode with recourse or contact with the carrier. The absence of agreements
      means that, with little or no notice, these wireless carriers could refuse
      to
      continue to purchase all or some of its products or change the terms under
      which
      they purchase its products. If these wireless carriers were to stop purchasing
      its products, Neonode may be unable to replace the lost sales channel on a
      timely basis and its results of operations could be harmed.

     

    Wireless
      carriers also significantly affect its ability to develop and launch products
      for use on their wireless networks. If Neonode fails to address the needs of
      wireless carriers, identify new product and service opportunities or modify
      or
      improve its multimedia phone products in response to changes in technology,
      industry standards or wireless carrier requirements, its products could rapidly
      become less competitive or obsolete. If Neonode fails to timely develop products
      that meet carrier product planning cycles or fail to deliver sufficient
      quantities of products in a timely manner to wireless carriers, those carriers
      may choose to emphasize similar products from its competitors and thereby reduce
      their focus on its products which would have a negative impact on its business,
      results of operations and financial condition.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Carriers,
      who control most of the distribution and sale of, and virtually all of the
      access for, multimedia phone products could commoditize multimedia phones,
      thereby reducing the average selling prices and margins for its products which
      would have a negative impact on its business, results of operations and
      financial condition. In addition, if carriers move away from subsidizing the
      purchase of mobile phone products, this could significantly reduce the sales
      or
      growth rate of sales of mobile phone products. This could have an adverse impact
      on its business, revenues and results of operations.

     

    As
      Neonode builds strategic relationships with wireless carriers, Neonode could
      be
      exposed to significant fluctuations in revenue for its multimedia phone
      products.

     

    Because
      of their large sales channels, wireless carriers may purchase large quantities
      of its products prior to launch so that the products are widely available.
      Reorders of products may fluctuate quarter to quarter, depending on end-customer
      demand and inventory levels required by the carriers. As Neonode develops new
      strategic relationships and launches new products with wireless carriers, its
      revenue could be subject to significant fluctuation based on the timing of
      carrier product launches, carrier inventory requirements, marketing efforts
      and
      its ability to forecast and satisfy carrier and end-customer
      demand.

    


    The
      mobile communications industry is highly competitive and many of Neonode’s
      competitors have significantly greater resources to engage in product
      development, manufacturing, distribution and
      marketing.

    


    The
      mobile communications industry, in which Neonode is engaged, is a highly
      competitive business with companies of all sizes engaged in business in all
      areas of the world, including companies with far greater resources. There can
      be
      no assurance that other competitors, with greater resources and business
      connections, will not compete successfully against us in the future. Neonode’s
      competitors may adopt new technologies that reduce the demand for its products
      or render its technologies obsolete, which may have a material adverse effect
      on
      the cost structure and competitiveness of its products, possibly resulting
      in a
      negative effect on its revenues, profitability or liquidity. 

     

    Neonode’s
      future results could be harmed by economic, political, regulatory and other
      risks associated with international sales and
      operations.

     

    Because
      Neonode sells its products worldwide and most of the facilities where its
      devices are manufactured, distributed and supported are located outside the
      United States, its business is subject to risks associated with doing business
      internationally, such as:

     

    
      	 	
              ·

            	
              changes
                in foreign currency exchange rates;

            


    

    
      	 	
              ·

            	
              the
                impact of recessions in the global economy or in specific sub
                economies

            


    

    
      	 	
              ·

            	
              changes
                in a specific country’s or region’s political or economic conditions,
                particularly in emerging markets;

            


    

    
      	 	
              ·

            	
              changes
                in international relations;

            


    

    
      	 	
              ·

            	
              trade
                protection measures and import or export licensing
                requirements;

            


    

    
      	 	
              ·

            	
              changes
                in tax laws;

            


    

    
      	 	
              ·

            	
              compliance
                with a wide variety of laws and regulations which may have civil
                and/or
                criminal consequences for them and its officers and directors who
                they
                indemnify;

            


    

    
      	 	
              ·

            	
              difficulty
                in managing widespread sales operations;
                and

            


    

    
      	 	
              ·

            	
              difficulty
                in managing a geographically dispersed workforce in compliance with
                diverse local laws and customs.

            


    

     

    In
      addition, Neonode is subject to changes in demand for its products resulting
      from exchange rate fluctuations that make its products relatively more or less
      expensive in international markets. If exchange rate fluctuations occur, its
      business and results of operations could be harmed by decreases in demand for
      its products or reductions in margins.

     

    While
      Neonode sells its products worldwide, one component of its strategy is to expand
      its sales efforts in countries with large populations and propensities for
      adopting new technologies. Neonode has limited experience with sales and
      marketing in some of these countries. There can be no assurance that Neonode
      will be able to market and sell its products in all of its targeted
      international markets. If its international efforts are not successful, its
      business growth and results of operations could be harmed.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Neonode
      must significantly enhance its sales and product development
      organizations.

     

    Neonode
      will need to improve the effectiveness and breadth of its sales operations
      in
      order to increase market awareness and sales of its products, especially as
      Neonode expands into new markets. Competition for qualified sales personnel
      is
      intense, and Neonode may not be able to hire the kind and number of sales
      personnel Neonode is targeting. Likewise, its efforts to improve and refine
      its
      products require skilled engineers and programmers. Competition for
      professionals capable of expanding its research and development organization
      is
      intense due to the limited number of people available with the necessary
      technical skills. If Neonode is unable to identify, hire or retain qualified
      sales marketing and technical personnel, its ability to achieve future revenue
      may be adversely affected. 

    


    Neonode
      is dependent on the services of its key personnel. 

    


    Neonode
      will be dependent on its current management for the foreseeable future. The
      loss
      of the services of any member of management could have a materially adverse
      effect on its operations and prospects. 

     

    If
      third parties infringe its intellectual property or if Neonode is unable to
      secure and protect its intellectual property, Neonode may expend significant
      resources enforcing its rights or suffer competitive
      injury.

     

    Neonode’s
      success depends in large part on its proprietary technology and other
      intellectual property rights. Neonode relies on a combination of patents,
      copyrights, trademarks and trade secrets, confidentiality provisions and
      licensing arrangements to establish and protect its proprietary rights. Its
      intellectual property, particularly its patents, may not provide them a
      significant competitive advantage. If Neonode fails to protect or to enforce
      its
      intellectual property rights successfully, its competitive position could
      suffer, which could harm its results of operations.

     

    Neonode’s
      pending patent and trademark applications for registration may not be allowed,
      or others may challenge the validity or scope of its patents or trademarks,
      including patent or trademark applications or registrations. Even if its patents
      or trademark registrations are issued and maintained, these patents or
      trademarks may not be of adequate scope or benefit to them or may be held
      invalid and unenforceable against third parties.

     

    Neonode
      may be required to spend significant resources to monitor and police its
      intellectual property rights. Effective policing of the unauthorized use of
      its
      products or intellectual property is difficult and litigation may be necessary
      in the future to enforce its intellectual property rights. Intellectual property
      litigation is not only expensive, but time-consuming, regardless of the merits
      of any claim, and could divert attention of its management from operating the
      business. Despite its efforts, Neonode may not be able to detect infringement
      and may lose competitive position in the market before they do so. In addition,
      competitors may design around its technology or develop competing technologies.
      Intellectual property rights may also be unavailable or limited in some foreign
      countries, which could make it easier for competitors to capture market
      share.

     

    Despite
      its efforts to protect its proprietary rights, existing laws, contractual
      provisions and remedies afford only limited protection. Intellectual property
      lawsuits are subject to inherent uncertainties due to, among other things,
      the
      complexity of the technical issues involved, and Neonode cannot assure you
      that
      it will be successful in asserting intellectual property claims. Attempts may
      be
      made to copy or reverse engineer aspects of its products or to obtain and use
      information that Neonode regards as proprietary. Accordingly, Neonode cannot
      assure you that it will be able to protect its proprietary rights against
      unauthorized third party copying or use. The unauthorized use of its technology
      or of its proprietary information by competitors could have an adverse effect
      on
      its ability to sell its products.

     

    Neonode
      has an international presence in countries whose laws may not provide protection
      of its intellectual property rights to the same extent as the laws of the United
      States, which may make it more difficult for them to protect its intellectual
      property.

     

    As
      part
      of its business strategy, Neonode’s target customers and relationships with
      suppliers and original distribution manufacturers in countries with large
      populations and propensities for adopting new technologies. However, many of
      these countries do not address misappropriation of intellectual property or
      deter others from developing similar, competing technologies or intellectual
      property. Effective protection of patents, copyrights, trademarks, trade secrets
      and other intellectual property may be unavailable or limited in some foreign
      countries. In particular, the laws of some foreign countries in which Neonode
      does business may not protect its intellectual property rights to the same
      extent as the laws of the United States. As a result, Neonode may not be able
      to
      effectively prevent competitors in these regions from infringing its
      intellectual property rights, which would reduce its competitive advantage
      and
      ability to compete in those regions and negatively impact its
      business.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    If
      Neonode does not correctly forecast demand for its products, Neonode could
      have
      costly excess production or inventories or it may not be able to secure
      sufficient or cost effective quantities of its products or production materials
      and its revenues, cost of revenues and financial condition could be adversely
      impacted.

     

    The
      demand for its products depends on many factors, including pricing and channel
      inventory levels, and is difficult to forecast due in part to variations in
      economic conditions, changes in consumer and enterprise preferences, relatively
      short product life cycles, changes in competition, seasonality and reliance
      on
      key sales channel partners. It is particularly difficult to forecast demand
      by
      individual variations of the product such as the color of the casing, size
      of
      memory, etc. Significant unanticipated fluctuations in demand, the timing and
      disclosure of new product releases or the timing of key sales orders could
      result in costly excess production or inventories or the inability to secure
      sufficient, cost-effective quantities of its products or production materials.
      This could adversely impact its revenues, cost of revenues and financial
      condition.

     

    Neonode
      relies on third parties to sell and distribute its products and Neonode relies
      on their information to manage its business. Disruption of its relationship
      with
      these channel partners, changes in their business practices, their failure
      to
      provide timely and accurate information or conflicts among its channels of
      distribution could adversely affect its business, results of operations and
      financial condition.

     

    The
      distributors, wireless carriers, retailers and resellers who sell or may sell
      and or distribute its products also sell products offered by its competitors.
      If
      its competitors offer its sales channel partners more favorable terms or have
      more products available to meet their needs or utilize the leverage of broader
      product lines sold through the channel, those wireless carriers, distributors,
      retailers and resellers may de-emphasize or decline to carry its products.
      In
      addition, certain of its sales channel partners could decide to de-emphasize
      the
      product categories that Neonode offers in exchange for other product categories
      that they believe provide higher returns. If Neonode is unable to maintain
      successful relationships with these sales channel partners or to expand its
      distribution channels, its business will suffer.

     

    Because
      Neonode intends to sell its products primarily to distributors, wireless
      carriers, retailers and resellers, Neonode will be subject to many risks,
      including risks related to product returns, either through the exercise of
      contractual return rights or as a result of its strategic interest in assisting
      them in balancing inventories. In addition, these sales channel partners could
      modify their business practices, such as inventory levels, or seek to modify
      their contractual terms, such as return rights or payment terms. Unexpected
      changes in product return requests, inventory levels, payment terms or other
      practices by these sales channel partners could negatively impact its business,
      results of operations and financial condition.

     

    Neonode
      will rely on distributors, wireless carriers, retailers and resellers to provide
      them with timely and accurate information about their inventory levels as well
      as sell-through of products purchased from us. Neonode will use this information
      as one of the factors in its forecasting process to plan future production
      and
      sales levels, which in turn will influences its public financial forecasts.
      Neonode will also use this information as a factor in determining the levels
      of
      some of its financial reserves. If Neonode do not receive this information
      on a
      timely and accurate basis, its results of operations and financial condition
      may
      be adversely impacted.

     

    Distributors,
      retailers and traditional resellers experience competition from Internet-based
      resellers that distribute directly to end-customers, and there is also
      competition among Internet-based resellers. Neonode also sells its products
      directly to end-customers from its Neonode.com web site. These varied sales
      channels could cause conflict among its channels of distribution, which could
      harm its business, revenues and results of operations.

     

    If
      its multimedia phone products do not meet wireless carrier and governmental
      or
      regulatory certification requirements, Neonode will not be able to compete
      effectively and its ability to generate revenues will
      suffer.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Neonode
      is required to certify its multimedia phone products with governmental and
      regulatory agencies and with the wireless carriers for use on their networks.
      The certification process can be time consuming, could delay the offering of
      its
      products on carrier networks and affect its ability to timely deliver products
      to customers. As a result, carriers may choose to offer, or consumers may choose
      to buy, similar products from its competitors and thereby reduce their purchases
      of its products, which would have a negative impact on its products sales
      volumes, its revenues and its cost of revenues.

     

    Neonode
      depends on its suppliers, some of which are the sole source and some of which
      are its competitors, for certain components, software applications and elements
      of its technology, and its production or reputation could be harmed if these
      suppliers were unable or unwilling to meet its demand or technical requirements
      on a timely and/or a cost-effective basis.

     

    Neonode’s
      multimedia products contain software applications and components, including
      liquid crystal displays, touch panels, memory chips, microprocessors, cameras,
      radios and batteries, which are procured from a variety of suppliers, including
      some who are its competitors. The cost, quality and availability of software
      applications and components are essential to the successful production and
      sale
      of its device products. For example, media player applications are critical
      to
      the functionality of its multimedia phone devices.

    


    Some
      components, such as screens and related integrated circuits, digital signal
      processors, microprocessors, radio frequency components and other discrete
      components, come from sole source suppliers. Alternative sources are not always
      available or may be prohibitively expensive. In addition, even when Neonode
      has
      multiple qualified suppliers, Neonode may compete with other purchasers for
      allocation of scarce components. Some components come from companies with whom
      Neonode competes in the multimedia phone device market. If suppliers are unable
      or unwilling to meet its demand for components and if Neonode is unable to
      obtain alternative sources or if the price for alternative sources is
      prohibitive, its ability to maintain timely and cost-effective production of
      its
      multimedia phone will be harmed. Shortages affect the timing and volume of
      production for some of its products as well as increasing its costs due to
      premium prices paid for those components. Some of its suppliers may be
      capacity-constrained due to high industry demand for some components and
      relatively long lead times to expand capacity. 

     

    If
      Neonode is unable to obtain key technologies from third parties on a timely
      basis and free from errors or defects, Neonode may have to delay or cancel
      the
      release of certain products or features in its products or incur increased
      costs.

     

    Neonode
      licenses third-party software for use in its products, including the operating
      systems. Its ability to release and sell its products, as well as its
      reputation, could be harmed if the third-party technologies are not delivered
      to
      them in a timely manner, on acceptable business terms or contain errors or
      defects that are not discovered and fixed prior to release of its products
      and
      Neonode is unable to obtain alternative technologies on a timely and cost
      effective basis to use in its products. As a result, its product shipments
      could
      be delayed, its offering of features could be reduced or Neonode may need to
      divert its development resources from other business objectives, any of which
      could adversely affect its reputation, business and results of
      operations.

     

    Neonode’s
      product strategy is to base its products on software operating systems that
      are
      commercially available to competitors. 

     

    Neonode’s
      multimedia phone is based on a version of Microsoft’s Windows CE on which
      Neonode licensed a right to customize and differentiate its users’ experience.
      Neonode cannot assure you that it will be able to maintain this relationship
      with Microsoft and that Microsoft will not grant similar rights to its
      competitors or that Neonode will be able to sufficiently differentiate its
      multimedia phone from the multitude of other devices based on Windows
      CE.

     

    In
      addition, there is significant competition in the operating system software
      and
      services market, including proprietary operating systems such as Symbian and
      Palm OS, open source operating systems, such as Linux, other proprietary
      operating systems and other software technologies, such as Java and RIM’s
      licensed technology. This competition is being developed and promoted by
      competitors and potential competitors, some of which have significantly greater
      financial, technical and marketing resources than Neonode has, such as Access,
      Motorola, Nokia, Sony-Ericsson and RIM. These competitors could provide
      additional or better functionality than Neonode does or may be able to respond
      more rapidly than Neonode can to new or emerging technologies or changes in
      customer requirements. Competitors in this market could devote greater resources
      to the development, promotion and sale of their products and services and the
      third-party developer community, which could attract the attention of
      influential user segments.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    If
      Neonode is unable to continue to differentiate the operating systems that
      Neonode includes in its mobile computing devices, its revenues and results
      of
      operations could be adversely affected.

     

    The
      market for multimedia phone products is volatile, and changing market
      conditions, or failure to adjust to changing market conditions, may adversely
      affect our revenues, results of operations and financial condition, particularly
      given our size, limited resources and lack of
      diversification.

     

    Neonode
      operates in the multimedia phone market which has seen significant growth during
      the past years. Neonode cannot assure you that this significant growth in the
      sales of multimedia devices will continue. If Neonode is unable to adequately
      respond to changes in demand for its products, its revenues and results of
      operations could be adversely affected. In addition, as its products mature
      and
      face greater competition, Neonode may experience pressure on its product pricing
      to preserve demand for its products, which would adversely affect its margins,
      results of operations and financial condition.

     

    This
      reliance on the success of and trends in its industry is compounded by the
      size
      of its organization and its focus on multimedia phones. These factors also
      make
      them more dependent on investments of its limited resources. For example,
      Neonode faces many resource allocation decisions, such as: where to focus its
      research and development, geographic sales and marketing and partnering efforts;
      which aspects of its business to outsource; and which operating systems and
      email solutions to support. Given the size and undiversified nature of its
      organization, any error in investment strategy could harm its business, results
      of operations and financial condition.

     

    Neonode’s
      products are subject to increasingly stringent laws, standards and other
      regulatory requirements, and the costs of compliance or failure to comply may
      adversely impact its business, results of operations and financial
      condition.

     

    Neonode’s
      products must comply with a variety of laws, standards and other requirements
      governing, among other things, safety, materials usage, packaging and
      environmental impacts and must obtain regulatory approvals and satisfy other
      regulatory concerns in the various jurisdictions where its products are sold.
      Many of its products must meet standards governing, among other things,
      interference with other electronic equipment and human exposure to
      electromagnetic radiation. Failure to comply with such requirements can subject
      them to liability, additional costs and reputational harm and in severe cases
      prevent them from selling its products in certain jurisdictions.

     

    For
      example, many of its products are subject to laws and regulations that restrict
      the use of lead and other substances and require producers of electrical and
      electronic equipment to assume responsibility for collecting, treating,
      recycling and disposing of its products when they have reached the end of their
      useful life. In Europe, substance restrictions began to apply to the products
      sold after July 1, 2006, when new recycling, labeling, financing and
      related requirements came into effect. Failure to comply with applicable
      environmental requirements can result in fines, civil or criminal sanctions
      and
      third-party claims. If products Neonode sells in Europe are found to contain
      more than the permitted percentage of lead or another listed substance, it
      is
      possible that Neonode could be forced to recall the products, which could lead
      to substantial replacement costs, contract damage claims from customers, and
      reputational harm. Neonode expects similar requirements in the United States,
      China and other parts of the world.

    


    As
      a
      result of these new European requirements and anticipated developments
      elsewhere, Neonode is facing increasingly complex procurement and design
      challenges, which, among other things, require them to incur additional costs
      identifying suppliers and contract manufacturers who can provide, and otherwise
      obtain, compliant materials, parts and end products and re-designing products
      so
      that they comply with these and the many other requirements applicable to
      them.

    


    Changes
      to governmental regulation or administrative practices may have a negative
      impact on Neonode’s ability to operate and Neonode’s profitability. There is no
      assurance that the laws, regulations, policies or current administrative
      practices of any government body, organization or regulatory agency in the
      United States or any other jurisdiction, will not be changed, applied or
      interpreted in a manner which will fundamentally alter the ability of Neonode
      to
      carry on its business. The actions, policies or regulations, or changes thereto,
      of any government body or regulatory agency, or other special interest groups,
      may have a detrimental effect on us. Any or all of these situations may have
      a
      negative impact on Neonode’s ability to operate and/or Neonode’s profitably.


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Allegations
      of health risks associated with electromagnetic fields and wireless
      communications devices, and the lawsuits and publicity relating to them,
      regardless of merit, could adversely impact our business, results of operations
      and financial condition.

     

    There
      has
      been public speculation about possible health risks to individuals from exposure
      to electromagnetic fields, or radio signals, from base stations and from the
      use
      of mobile devices. While a substantial amount of scientific research by various
      independent research bodies has indicated that these radio signals, at levels
      within the limits prescribed by public health authority standards and
      recommendations, present no evidence of adverse effect to human health, Neonode
      cannot assure you that future studies, regardless of their scientific basis,
      will not suggest a link between electromagnetic fields and adverse health
      effects. Government agencies, international health organizations and other
      scientific bodies are currently conducting research into these issues. In
      addition, other mobile device companies have been named in individual plaintiff
      and class action lawsuits alleging that radio emissions from mobile phones
      have
      caused or contributed to brain tumors and the use of mobile phones pose a health
      risk. Although its products are certified as meeting applicable public health
      authority safety standards and recommendations, even a perceived risk of adverse
      health effects from wireless communications devices could adversely impact
      use
      of wireless communications devices or subject them to costly litigation and
      could harm its reputation, business, results of operations and financial
      condition.

     

    Changes
      in financial accounting standards or practices may cause unexpected fluctuations
      in and adversely affect our reported results of
      operations.

     

    Any
      change in financial accounting standards or practices that cause them to change
      the methodology or procedures by which Neonode tracks, calculates, records
      and
      reports its results of operations or financial condition or both could cause
      fluctuations in and adversely affect its reported results of operations and
      cause its historical financial information to not be reliable as an indicator
      of
      future results. 

     

    Inability
      to Meet Financial Projections.

     

    Management’s
      financial projections are based on assumptions and estimates that are inherently
      uncertain. Although Neonode believes these assumptions to be reasonable as
      of
      the date of the Subscription Agreement, they are subject to significant
      business, economic and competitive uncertainties and contingencies, many of
      which are beyond Neonode’s control. These factors include, among others, general
      economic and business conditions, competition, actualization of sales pipeline
      and inventory and payment cycle assumptions. Accordingly, you should not place
      undue reliance on the prospective financial information. Actual results may
      vary
      materially, and adversely, from the projections. In addition, the projections
      have not been examined, reviewed or compiled by Neonode independent public
      accountants, and they have expressed no opinion or other form of assurance
      thereon.

     

    Wars,
      terrorist attacks or other threats beyond its control could negatively impact
      consumer confidence, which could harm our operating
      results.

     

    Wars,
      terrorist attacks or other threats beyond its control could have an adverse
      impact on the United States, Europe and world economy in general, and consumer
      confidence and spending in particular, which could harm its business, results
      of
      operations and financial condition.

    


    If
      we are unable to complete the Merger and the Offering of Senior Secured Notes,
      our business will be adversely affected.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    If
      the
      Merger and the Offering of Senior Secured Notes are not completed, our business
      and the value of our stock may be adversely affected. We currently anticipate
      that, upon completion of the Offering of Senior Secured Notes, our available
      cash balances, available borrowings and cash generated from operations will
      be
      sufficient to fund our operations only through December 2007. If we are unable
      to complete the transactions, we may be unable to find another way to grow
      our
      business. Costs related to the transactions, such as legal, accounting and
      financial advisor fees, must be paid even if the transactions are not completed.
      In addition, even if we have sufficient funds to continue to operate our
      business but the transactions are not completed, the value of our common stock
      may decline.

    


    We
      may not realize any anticipated benefits from the
      Merger.

     

    While
      we
      believe that Neonode will benefit from the increased liquidity and exposure
      resulting from a merger with a public company, there is substantial risk that
      the synergies and benefits sought in the transactions might not be fully
      achieved. The expense of compliance with US regulatory requirements for public
      companies is high.

    


    The
      exchange rate in the Merger will not be adjusted, even if there is a decrease
      in
      the price of SBE common stock.

    


    The
      price
      of SBE common stock at the time of the Merger may vary from its price at the
      date of this Notice. Therefore, the shares that will be issued upon conversion
      of the Notes in connection with the Merger may have a lesser value than the
      value of the same number of shares on the date of this Notice. Variations in
      the
      price of SBE common stock before the completion of the Merger may result from
      a
      number of factors that are beyond our control, including actual or anticipated
      changes in our business, operations or prospects, market assessments of the
      likelihood that the transactions will be consummated and the timing thereof,
      regulatory considerations, general market and economic conditions and other
      factors. At the time of your subscription for Senior Secured Notes, you will
      not
      know the exact value of the shares that we will issue in the
      merger.

    


    In
      addition, the stock market generally has experienced significant price and
      volume fluctuations. These market fluctuations could have a material effect
      on
      the market price of our common stock before the Merger is completed, and
      therefore could materially decrease the value of the shares you would receive
      in
      the Merger.

    


    The
      purchase price for the SBE shares issued in exchange for Neonode securities
      issuable upon conversion of the Senior Secured Notes was determined by
      negotiation and will not be modified, even if there is a decrease in the price
      of SBE common stock.

    


    The
      purchasers of Senior Secured Notes are obliged to convert such securities into
      shares of SBE common stock and warrants to purchase SBE common stock on terms
      that were determined by negotiation and without reference to objective criteria
      of value. These prices bear no relationship to Neonode’s assets, net worth, book
      value, (loss) per share or net loss, whether before or after the Merger.
      Accordingly, you may not be able to sell the securities you receive in Merger
      at
      a price equal to your cost for such securities.

    


    Future
      sales of SBE common stock issued in the transactions could cause the market
      price for SBE common stock to decline significantly.

    


    After
      the
      Merger, sales of substantial amounts of our common stock in the public market
      could cause the market price of SBE common stock to fall, and could make it
      more
      difficult for us to raise capital through public offerings or other sales of
      our
      capital stock. Although all the holders of our securities will enter into
      lock-ups similar to Questionnaire and Lock-Up, an agreement that provides,
      in
      part, that, the shares of our common stock that the shareholder receives in
      connection with the merger can not be sold until six months after the date
      of
      the Merger Agreement, we are required to file a registration statement for
      the
      resale of all shares that are issued to Neonode security holders in the Merger
      no later than 90 days after the Merger is completed. Once the registration
      statement relating to such shares becomes effective, the shares will generally
      be freely tradeable without restriction. Such free transferability could
      materially and adversely affect the market price of our common stock.


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    


    Authorization
      to Sell Additional Common Stock.

    


    Neonode’s
      certificate of incorporation authorizes it to issue up to 10,000,000 shares
      of
      common stock, which may be issued by our board of directors for such
      consideration as they may deem sufficient without seeking shareholder approval.
      The issuance of additional shares of common stock in the future will reduce
      the
      proportionate ownership and voting power of current shareholders. 

    


    Senior
      Secured Notes. 

    


    Although
      the Senior Secured Notes benefit from a security interest in the shares of
      Neonode AB held by Neonode Inc., there is no assurance that in the event of
      foreclosure on the Senior Secured Notes that the holders thereof would be able
      to peacefully sell such shares or realize sufficient amounts from such sale
      to
      pay back the Senior Secured Notes. 

    


    No
      Public Market; Transfer Restriction. 

    


    There
      is
      no public market for Neonode’s securities and, other than the Merger, Neonode
      has no current intention to take any actions that might result in the creation
      of a public market for its securities. Each purchaser of Senior Secured Notes
      must agree to a six-month lock-up (i.e., restriction on transfer) of all Company
      securities.

    


    Forward-Looking
      Statements. 

     

    Neonode
      has provided you with certain forward-looking statements, including statements
      regarding the intent, belief or current expectations of Neonode and its
      management with respect to, among other things, (i) the expected growth of
      selected markets, (ii) trends affecting Neonode’s financial condition or results
      of operations, (iii) the impact of competition and (iv) the commencement of
      certain operations. Any forward-looking statements involve known and unknown
      risks, uncertainties and other factors. Such risks, uncertainties and other
      factors may cause actual results to differ materially from any future results,
      performance or achievements expressed or implied by such forward-looking
      statements.