Neonode Reports Quarter Ended March 31, 2022 Financial Results

STOCKHOLM, SWEDEN, May 11, 2022 — Neonode Inc. (NASDAQ: NEON), today reported financial results for the three months ended March 31, 2022.

FINANCIAL SUMMARY FOR THE QUARTER ENDED MARCH 31, 2022:

• Revenue of $1.3 million, a decrease of 20.8% compared to the same period in the prior year.     
• Operating expenses of $2.6 million, a decrease of 12.2% compared to the same period in the prior year.     
• Net loss of $1.4 million, or $0.10 per share, compared to $1.6 million, or $0.14 per share, for the same period in the prior year.     
• Cash used by operations of $2.3 million compared to $2.0 million for the same period in the prior year.     
• Cash and accounts receivable of $16.3 million as of March 31, 2022, compared to $18.7 million as of December 31, 2021.

THE CEO’S COMMENTS

“Despite challenging market conditions that continued to affect our overall business in the first quarter of 2022, I am pleased to see that our revised strategy, with a focus on our Touch Sensor Modules (“TSM”) business for leading elevator and interactive kiosk customers as well as new applications for automotive customers, is beginning to show results. We are encouraged by the growing interest in our contactless touch solutions and our TSMs from elevator and interactive kiosk customers in Asia, Europe and North America, which we are working to capitalize on,” said Dr. Urban Forssell, Neonode’s CEO.

“We are also continuing to see a growing interest in our solutions for object detection, gesture sensing and driver and in-cabin monitoring from automotive customers and continue to see opportunities to license our well-proven, high-performance touch technology to customers in the military and avionics, medical and industrial automation segments. We are working to win new development projects with customers in these segments that will pave the way for increased license revenues in the future when their products enter mass production. We continue to execute on our strategy and continue to see big potential to grow in the coming years,” continued Dr. Forssell.

“Despite these promising developments, our overall results for the first quarter of 2022 were impacted by the fact that customers in several of our key markets, particularly Asia, are still being affected by lock-downs associated with the COVID-19 pandemic and many of them are also experiencing supply chain constraints due to a shortage of semiconductor components, which in turn is negatively affecting their businesses and delaying their development projects and new product launches, which ultimately affects our business” concluded Dr. Urban Forssell.

FINANCIAL OVERVIEW FOR THE QUARTER ENDED MARCH 31, 2022

Net revenues for the quarter ended March 31, 2022 were $1.3 million, a 20.8% decrease compared to the same period in 2021. For the 2022 period, license revenues were $1.1 million, a decrease of 14.7% compared to the 2021 period. The decrease is primarily the result of component shortages within the printer and automotive markets related to the COVID-19 pandemic, which in turn impacted our license revenues for the first quarter of 2022.

Revenues from product sales were $0.1 million, a decrease of 58.6%. In the first half of 2021 we saw an increase in product sales. In the second half of 2021 and continuing in the first quarter of 2022, product sales were negatively impacted due to COVID-19 driven lock-downs in Asia. Our elevator and kiosks customers in Asia have been first adopters of our contactless touch technology and as expected, most of our initial TSM sales are related to retrofit solutions, and are more limited. New customer equipment launches can take 6 to 18 months, or even longer, before a customer is ready to begin mass producing.

Gross margin related to products was 65.3% for the first quarter of 2022 compared to 23.9% for the same period in 2021. Adjusting for AirBar revenues and costs, the products gross margin was 61.9% for the first quarter of 2022 compared to 25.9% for the same period in 2021. Our operating expenses decreased 12.2% for the first quarter of 2022 compared to the same period in 2021, primarily due to lower professional fees and depreciation and amortization.

Net loss attributable to Neonode for the three months ended 2022 was $1.4 million, or $0.10 per share, compared to a net loss of $1.6 million, or $0.14 per share, for the same period in 2021. Cash used by operations was $2.3 million in the first quarter of 2022 compared to $2.0 million for the same period in 2021. The increase is primarily the result of increased inventory to secure our future product deliveries.

Cash and accounts receivable totaled $16.3 million and working capital was $17.9 million as of March 31, 2022 compared to $18.7 million and $19.1 million as of December 31, 2021, respectively.

A reconciliation of adjusted gross margin products to gross margin for the three months ended March 31, 2022 and 2021, is provided in the financial schedules that are part of this press release. An explanation of this non-GAAP financial measure is also included under the heading “Non-GAAP Financial Measures.”

For more information, please contact:

Chief Financial Officer
Fredrik Nihlén
E-mail: fredrik.nihlen@neonode.com

Chief Executive Officer
Urban Forssell
E-mail: urban.forssell@neonode.com

About Neonode
Neonode Inc. (NASDAQ:NEON) is a publicly traded company, headquartered in Stockholm, Sweden and established in 2001. The company provides advanced optical sensing solutions for contactless touch, touch, gesture control, and in-cabin monitoring. Building on experience acquired during years of advanced R&D and technology licensing, Neonode’s technology is currently deployed in more than 80 million products and the company holds more than 100 patents worldwide. Neonode’s customer base includes some of the world’s best-known Fortune 500 companies in the consumer electronics, office equipment, automotive, elevator, and self-service kiosk markets.

NEONODE and the NEONODE logo are trademarks of Neonode Inc. registered in the United States and other countries.

For further information, please, visit www.neonode.com

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Safe Harbor Statement
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements relating to expectations, future performance or future events. These statements are based on current assumptions, expectations and information available to Neonode management and involve a number of known and unknown risks, uncertainties and other factors that may cause Neonode's actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements.

These risks, uncertainties, and factors are discussed under "Risk Factors" and elsewhere in Neonode's public filings with the SEC from time to time, including Neonode's annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are advised to carefully consider these various risks, uncertainties and other factors. Although Neonode management believes that the forward-looking statements contained in this press release are reasonable, it can give no assurance that its expectations will be fulfilled. Forward-looking statements are made as of today's date, and Neonode undertakes no duty to update or revise them.

Non-GAAP Financial Measures
In addition to presenting our financial results in accordance with accounting principles generally accepted in the United States (“GAAP”), we use adjusted gross margin to measure our financial performance. We define adjusted gross margin products as gross margin products excluding AirBar sales revenues and costs. We believe adjusted gross margin products is a meaningful measure because it reflects the performance of our TSM business, which is our current focus. Non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. Our use of adjusted gross margin products, a non-GAAP financial measure, has important limitations as an analytical tool because it excludes some, but not all, items that affect the most directly comparable GAAP financial measure. You should not consider adjusted gross margin in isolation or as substitutes for analysis of our results as reported under GAAP. Our definition of non-GAAP adjusted gross margin may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

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