Neonode Reports Year Ended December 31, 2020 Financial Results

STOCKHOLM, SWEDEN – March 10, 2021 – Neonode Inc. (NASDAQ: NEON), today reported financial results for the fiscal year ended December 31, 2020.

FINANCIAL SUMMARY FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020:

• Revenue of $6.0 million, a decrease of 10.0% compared to prior year.
• Operating expenses of $11.1 million, a decrease of 5.1% over the prior year.
• Net loss of $5.6 million, or $0.56 per share compared to $5.3 million, or $0.60 per share for prior year.
• Cash used by operations of $5.8 million compared to $3.5 million for prior year.
• Cash and accounts receivable of $12.2 million as of December 31, 2020 compared to $3.7 million for the prior year end.

THE CEO’S COMMENTS

“My first year as CEO has been characterized by periods of frustration and at the same time great satisfaction. We had to navigate some definite headwinds in 2020, including not only the general global economic downturn caused by the COVID-19 pandemic but also the effects of the world going on lockdown, which brought on new challenges for our business development work and slowed decision making processes at most of our customers. However, the pandemic also created an unexpected opportunity for us to leverage existing products and knowhow in contactless touch applications. This is a new market for which we feel we are uniquely positioned to provide the perfect technology solution with our Touch Sensor Modules. Building on this we have identified and engaged with several new customers and partners in Asia, Europe, North America, and other parts of the world that will help us increase our product sales significantly in the coming years. During the year we have also recruited several new, strong members to our Sales and Engineering teams, who are driving our efforts to capitalize on the growing opportunities in current and new markets. Coming out of 2020, we feel we are well positioned with a very good team, a strong technology and IP portfolio, a well-recognized brand, and an impressive and growing customer list, which we will capitalize on in 2021 and the coming years,” said Dr. Urban Forssell, CEO of Neonode.

“Although our license revenue from existing legacy customers decreased in 2020 compared to the prior year, we are encouraged by positive customer interest in our technology and solutions offerings in the Military & Avionics, Industrial, and Automotive market segments. We are engaged with several customers in these markets and have identified several application areas where we believe our technology is very competitive and adds value, which we will use to grow our solutions and licensing businesses in the coming years. Our presence in the new market for contactless touch continues to grow. Here our focus is on the Interactive Kiosk and Elevator market segments and we are addressing these markets both directly with our Sales team and indirectly via different types of partners, mainly value-added resellers and distributors. Growth in contactless touch for kiosks and elevator is currently led by our customers and partners in Asia with a growing demand in Europe and North America. Customers and partners in China and Singapore have installed aftermarket solutions in elevators and public space kiosks in airports, hospitals and hospitality businesses and are now installing new contactless-touch-enabled devices in hospitals, train stations and other locations. In Japan and South Korea our partners are increasing the number of devices incorporating our sensor modules in elevators and kiosks in both retrofit and new OEM applications. Europe and North America are not far behind. We strongly believe the increasing demand related to these customer activities will define 2021 as the transition year in our drive to profitability,” concluded Dr. Forssell.

FINANCIAL OVERVIEW FOR THE FISCAL YEAR ENDED DECEMBER 31, 2020

Since January 1, 2020, we have allocated revenues to three different business areas. Revenues allocated to HMI Solutions consist of license fees and related non-recurring engineering revenues while revenues allocated to HMI Products are derived from the sale of sensor modules and related non-recurring engineering revenues. We expect that future revenues within our Remote Sensing Solutions business area will be derived from license fees and non-recurring engineering revenues.

Net revenue for fiscal 2020 was $6.0 million, a 10.0% decrease, compared to 2019. For 2020, HMI Solutions revenues were $5.0 million, a decrease of 17.6% compared to 2019. This is primarily due to lower license fees from our automotive and consumer electronics customers. These decreases were partially offset by an increase in NRE fees for prototype work related to military avionics projects. Our HMI Products revenues were $1.0 million, an increase of 66.8% compared to 2019. This is due to larger volumes of our sensor modules being shipped to our distributors and customers designing and selling medical devices, airport baggage trolleys and contactless touch solutions for elevators and self-service kiosks, which incorporate our sensor modules. We continue to earn revenues from the sale of our AirBar products, however the number of AirBar units sold continues to decrease over time.

Our combined total gross margin was 82.0% in 2020 compared to 89.7% in 2019. The decrease in total gross margin in 2020 as compared to 2019 is primarily due to the change in the mix of the components of overall revenue with an increase in sales of sensor modules and NRE revenues which have a lower overall gross margin compared to the 100% gross margin license fee business. Our operating expense decreased slightly in 2020 compared to 2019 and our overall operating expenses remain within budget.

Net loss for fiscal 2020 was $5.6 million, or $0.56 per share, compared to a net loss of $5.3 million, or $0.60 per share, in fiscal 2019.

In fiscal 2020, our cash used by operations was $5.8 million compared to $3.5 million in fiscal 2019.

Cash and accounts receivable totaled $12.2 million and working capital was $10.4 million as of December 31, 2020 compared to $3.7 million and $2.4 million as of December 31, 2019, respectively.

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