Neonode Inc (NEON) 2015 Q1 法說會逐字稿

Hello, everyone. Thank you for standing by and welcome to Neonode's first quarter ended March 31, 2015 earnings conference call. (Operator Instructions). Thank you. At this time, for opening remarks and introductions I would like to turn the call over to David Brunton, Neonode's Head of Corporate Investor Relations. David, please go ahead and start the conference.

Welcome and thank you for joining us. On today's call we will review our first-quarter 2015 financial results and provide a corporate update. Our update will include details of customer activities, technology developments and other items of interest. The prepared remarks will be provided by Thomas Eriksson, our CEO, and Lars Lindquist, our CFO.

Before turning the call over to Thomas and Lars, I would like to make the following remarks concerning forward-looking statements. All statements in this conference call other than historical facts are forward-looking statements. The words anticipate, believe, estimate, expect, tend, will, guides, confidence, targets, projects and other similar expressions typically are used to identify forward-looking statements.

These forward-looking statements do not guarantee the future performance that may involve or be subject to risks, uncertainties and other factors that may affect Neonode's business, financial position and other operating results, which include, but are not limited to, the risk factors and other qualifications contained in Neonode's annual report on 10-K, quarterly reports on 10-Q and other reports filed by Neonode with the SEC to which your attention is directed.

Therefore actual outcomes and results may differ materially from what is expected or implied by these forward-looking statements. Neonode expressly disclaims any intent or obligation to update these forward-looking statements. At this time it is my pleasure to turn the call over to Thomas Eriksson, Chief Executive Officer of Neonode. Thomas, please go ahead.

Thank you, David. Good morning, everyone. To begin I would like say that we carried into Q1 2015 the great momentum built throughout 2014, and further solidified our opportunities in our main market segments: automotive, printer and PC.

Our objectives for 2015 and beyond are to execute on the many opportunities that we are working on to further develop our technology, ensuring we maintain our competitive advantages as a technology licensing Company. We believe that our strategy is paying off and that Neonode is in a solid position to be a dominant player within our core market segments.

During this call I will give some color as to our customer activities within our core focus markets, and an update with some news on our recent technology developments. So let's start off with some exciting news from our automotive business and the recent Auto Shanghai 2015 Motor Show.

At the massive Shanghai Motor Show last month the public was able to experience firsthand our successful entry into the automotive market with touch systems and cars ranging from economy all the way to high end and premium. At the show our customers showcased a number of cars that were equipped with our touch technology on the center stack display.

I will take this opportunity to mention a few of these OEM brand names. We have three MG models, the GM Baojun 560, the Chevrolet [new] Cruze, the Buick Excelle XT, three [JSC] models, the Scion (inaudible), the Suzuki Vitara, the Volvo XC90, the Haval H6, H6 Coupe all being launched at the show.

During the show we also had our technology on display by Bosch Multimedia under the text driver focused. Our hard work and focus in the automotive space has resulted in key OEMs relying on the robustness and reliability of our technology for controlling several of the cars' vital functions.

Volvo, for example, has taken a big leap to simplified interaction with infotainment system reducing the number of buttons to just seven. What this means for the driver is a greatly enhanced driving experience with the added benefit of safety through reduce distractions.

Being Swedish I think it is very interesting that just yesterday Volvo announced that they are hiring an additional 1,500 employees to work a third production shift building the XC90. They have been overwhelmed with the global orders and have a backlog of over 30,000 cars in just the first couple of months of the release. This is very exciting news for us since we are the touch in every XC90 they build.

According to published reports global production of light vehicles is set to head 100 million in 2017. And we know that along with this will be an increase in new cars having infotainment systems with touch sensing technologies.

For Neonode the automotive segment represents several opportunities that are not only limited to touch on the center stack infotainment system. Per our previous public announcements, our zForce drive technology is being integrated into the steering wheel.

However, we are also developing new exciting technology for our sensors to be in car door handles for keyless entry. This is another massive opportunity that Neonode is very well positioned to offer OEMs something disruptive.

Touch and proximity in cars has become a must-have feature just like air-conditioning, car radio or ABS brakes. To stay competitive OEMs must offer touch on all of their ranges, but to do this they need reliable, low cost solutions which Neonode provides.

We can definitely see the day where we will have multiple products in a single car that each uses our touch technology interactive door handles, sensor console display, rear seat infotainment systems, and interactive steering wheels. The licensees for all of these products combined will be quite impressive indeed. This is our vision for the auto market and we are currently designing all of the products mentioned for various customers.

And now over to PC space and what we are doing and this segment. Per our 2014 earnings Neonode has signed a contract with a leading PC OEM. There is a high level of activity with these OEMs for development of products and it is progressing according to all expectations. We are expecting products to be launched in 2015 and now we are also working with them on products for 2016.

Neonode is also heavily engage with other leading PC OEMs for products and the major PC OEMs for reference to sign platforms, which launch targets are 2016 and 2017. We cannot disclose the customers until the products are ready for market. But what we can say is there is a great (inaudible) deal of activity around our technology in the PC space, especially for [all-in-ones] and PC monitors.

All of our customers are working on adopting our previously announced zForce EDGE design, which is the only touch technology in the market that will feasibly allow true edge-to-edge [zero vessel] design.

Neonode is in a complete class of its own in this space and our solution addresses the stringent industrial design demands offering the most responsive touch experience at a cost which is over 50% less than the lowest competing touch technology available in the market. We believe we have the best technology for these applications and are extremely excited about our prospects in the PC markets.

With Neonode being a license Company our focus is volume devices. The PC market would not be a complete target for us unless we could completely offer a touch and proximity solution for notebooks as well as larger sizes. With the notebook market volume being much greater than all-in-one monitors combined, it could not be justified as a core market for Neonode unless we could truly address the whole PC market including notebooks.

I can tell you that we now have zForce Air for notebook sizes as a product offering that combines simple integration for our customers, low-cost, low-power consumption and high level of functionality. Our customers tell us we want touch to be what a built-in camera is to a notebook PC and what ABS brakes are to cars. We just want it in there, but we need it with the lowest cost possible and with the same functionality.

Neonode's objective is to get touch in every one of these devices in the 300 million plus unit per year market and we are relentless about achieving this. To this end we have expanded our team in Taiwan to focus exclusively on the PC market as the majority of the PC business is located in Taiwan.

With our current business pipeline evolving and newly developed technologies ready, we are confident of becoming a major force in the PC touch and proximity segment.

And now over to the printer market. We have over the last few quarters talked a lot about the printer market, especially HP and a few other Tier 1 customers, who combined comprise over 75% of the 125 billion units per year global printer market. I want to let you know our progress with these customers.

HP continues to expand their product offering and their rollout plan is on track. We are also working with them on future products and replacement of the current printer models. At the same time, we are in product development with our other printer customers with the expectation that they will release printers using our touch to the market in 2016.

All these development projects are going according to the development plans and I'm very satisfied with the progress we have made in the printer market. I will keep you informed about our progress in these market segments on future calls.

Another segment that we are being successful in is the eReader business. We talked about Amazon on our last call and I'm happy to see that the sales of their eReaders with our touch exceeded our expectations. Amazon recently announced a new entry-level eReader using our touch which is now available for sale in China as the first market.

We are happy to see that the expansion of these devices now extends beyond the US market. We continue to have a great relationship with Amazon and are working with them for the next devices.

And now I'd like to move over to an update on our technology developments and strategy. Consistent with our strategy, we continue to invest in our technology development, which enables us to meet our Company goals. I can tell you this is paying off and I am highly encouraged with our new technology developments.

We have developed a new variation of zForce Air, which comes as a highly integrated module. We will showcase the zForce Air model during the Computex show in June. In short, the zForce Air module will allow for touch enablement of devices for a bill of material cost that is as slow as $0.25 per diagonal inch.

I believe that this is a highly disruptive price point that means touch can now be integrated into virtually any device. Competing low-cost technologies are all $1.00 per diagonal inch. Just as important, this module type of design will enable us the scale and aggressively enter new market segments.

ZForce Air opens up a whole new world of opportunities for Neonode. OEMs know that the future is all about touch, but a need for ease of manufacturability at the right price point to make it happen and that is what we are giving them.

I want to close off by saying that I believe we have the opportunities and the technologies to take Neonode to a position of market leadership in our [shows] and focused markets. Of course our technology is not limited to any applications, but we are committed to focusing and making sure we dominate these markets first. And now over to Lars who will talk about the financials.

Thanks, Thomas. Earlier today we filed our Form 10-Q with SEC and released our first-quarter 2015 financial results in a press release. Both of these are available for download from the Investors section of our website at Neonode.com. I will now, however, only focus on the highlights.

But first of all I would like to repeat and explain for all you that -- for most of our customers? record licensee revenues one quarter after our customers have shipped products to the market. In other words, deferred revenue recognition. Good to know when you analyze our reports.

So first quarter, our revenues were approximately $2.3 million compared to $1 million for the first quarter last year, which represents an increase of 123%. Our revenue for the quarter includes approximately $1.8 million of licensees, $500,000 of NRE fees compared to $900,000 license fees and $100,000 of NRE fees for same quarter last year.

The increased net revenues is mainly due to licensee revenues from new product shipment of printers with HP, eReaders with Amazon and infotainment systems with various automotive customers. This is further enhanced by NRE revenues related to completion of customer projects for printer and automotive projects.

So, let me explain how our license fees are distributed by market, information we believe is valuable for you and understanding our business and how it is developed.

Well, approximately 60% of our license fees and revenues for the quarter relates to eReader and tablets, 35% to printers and 5% to automotive compared to 100% eReader and tablet revenues for the same quarter last year.

Our total operating expenses for the quarter was $4 million compared to $4.9 million for the same quarter last year. The 18% decrease is due to several factors including lower legal expense related to patent filings and corporate [FC] compliance, lower non-cash stock option expenses and non-recurring restructuring expenses, which is enhanced by favorable exchange rate developments between US dollars and Swedish kronor.

Our net loss for the quarter was $2.1 million or $0.05 per share as compared to a net loss of $4 million or $0.11 per share for the same quarter last year.

As of March 31, we had cash of approximately $4.5 million, $2 million of accounts receivable and $1.6 million of working capital. The majority part of the $2 million accounts receivable balance has been paid during April, of which $1.5 million relates to the initial payment from Autoliv for the steering wheel project. Our shareholder's equity is $1.8 million and they have [40] to 5 million shares of common stock outstanding.

I know many of you have questions concerning our cash going forward. I stated in previous calls that we believe our cash projections will be sufficient to operate the Company. This is based on our goal of holding expenses within a frame of $16 million for the year 2015.

Our cash burn from operations during the quarter was $1.6 million compared to $2.7 million for the same period 2014 and $2.8 million for the fourth quarter 2014. So I still maintain that positive cash from operations will occur in 2015.

We expect our license fee revenues during the year to increase mainly driven by growing revenues from printers with HP, eReaders with Amazon and others, PC product scheduled for release during [AMDOC] 2015 and continued ramp of infotainment systems with various automotive customers.

Neonode has also agreements in place for $3 million in NREs from Autoliv. Consequently our goal of $3 million to $5 million of cash from NREs is well underway. Now I would like to turn the call back over to Thomas for some closing comments.

Thank you, Lars. To recap, we had a lot of visibility of our technology now in the market, especially in the automotive space. We signed a license agreement with Harman, a leading Tier 1 automotive supplier, and with our new zForce Air technology, we also have a solution to address our strategy for Touch-in-Everything.

Our management is also very pleased and excited about the future and that all the pieces are coming together. This concludes our prepared remarks and we will open the call for questions. Thank you very much for listening in.

(Operator Instructions). Cody Acree, Ascendiant Capital.

Thomas, just a quick clarification. You mentioned a cost per diagonal inch. What was that number?

A $0.25 [sum], US dollar.

And is that across applications regardless whether that is automotive, PCs or what have you?

It is slightly more expensive for automotive because we have in that case automotive qualified components. In consumer space it is a different component inside of the module.

You were able to give us some details, and thank you for that, on Autoliv earlier last quarter on the NREs and just the details around that partnership financially. When might you be able to give us similar details regarding your PC partnership?

Normally we can't [disclosure] either -- I mean the companies we work with or the launch plans or --. But we continue to do that as products will be released to the market.

But, regardless of products, can you talk about the financial terms? You had talked about previously prepayments, NREs that may be associated with this. One of the things that Lars ended up with was obviously the concerns of cash. And so, any prepayments or NREs from that PC partner could be very important.

It's Lars here. And be happy to make it (inaudible) on that. We did not model in a prepayment of licensees in our financial plans to run our operations. That is a basic capital approach. However, we always expect significant repayment from customer projects. So that's -- what it is.

I guess, Lars, as you look at your cash balances and liquidity going forward, how comfortable and confident are you that with this schedule with NREs, with any prepayments that you have coming in with the agreements with Autoliv, that you will be able to kind of bridge between here and when you expect to reach cash flow positive.

(Inaudible) I addressed in my prepared remarks, we believe it is -- a (inaudible) will be sufficient to operate the Company.

And so, you don't envision a need to go back to the capital markets to manage your liquidity?

That is correct.

And then your expansion of the your presence in Taiwan, can you just help us -- the driver of that? Is this signaling a possible acceleration of notebook revenue with your current PC OEM? Or is this just an expansion of engagements with a broader base?

No we have to be close to our customers. In this case most of the business, as I said, are in Taiwan. [Initial] production might be in China, but all these customers of course when they go into product development they need a lot of support. And we have built an organization with sales and quality management and product management in Taiwan to support this and accelerate getting products out in the market for our customers.

And then lastly. Lars, what is the timing of the expected Autoliv $1.5 million of remainder payments? I guess how do we model those coming through to cash flow?

Well, we have basically disclosed that also in the earlier press release and also in the 10-Q. Basically the initial $1.5 million will be amortized over the 12-month period starting from April 1. And that remaining $1.5 million is connected to (inaudible) during the same period.

No, I am wondering about the timing of receipt of that $1.5 million. How do we think about that coming in?

The initial $1.5 million is paid.

No, no, no. The second $1.5 million. Timing of that -- those payments.

That will be related to milestones -- three milestones over the 12-month period.

Okay, thank you, guys.

Rob Stone, Cowen and Company.

First question for Thomas. You mentioned the new version of zForce Air in a modular fashion. I guess you have been working on PC products for a long time, but it has taken a while to get to visibility on first products shipping, which I guess is the second half of this year. Could you comment on how you think this new modular solution might affect time to market for subsequent PC designs?

Yes, I mean it will make it much easier for us to scale and less customization on each customer. So this will be a module that is designed in different sizes of display. So it is much easier for our customers to take the module and to put into their products. And we doesn't have to constantly be involved in customization process. So we expect to be able to scale faster and also approaching more customers at the same time.

Can you say what that might mean for roughly how many months or quarters it would then take for a project to come from first engagement to being able to ship?

Normally we don't affect the schedule of a notebook, for example, it's typically in the range of 6 to 12 months for a notebook to get to market. If it is a monitor it is less than that. If it is all-in-one it is typical the same size -- and at the same time. If it is a keyboard and (inaudible) can be left down to a month. So it depends a little bit on the applications.

Okay. Along those lines, you mentioned that the first PC products are expected to ship this year. How would you characterize, and I recognize this is entirely up to your customer when things get launched, but what gives you visibility on that and how would you characterize your confidence?

Well again, we can't really disclose their plans or their launch plans. But we of course are very excited about the things we are doing with the PC. And as I said before, we are also working with not just one customer, it's a lot of different customers we are working on.

But again, we can't really go before time and tell the market what they are going to do. But we are working with a few customers and some customers have plans to put products in the market.

On top of that, we will also be exhibiting at Computex in our own stand to demonstrate our technology. So if any of you are in Taiwan, I suggest you stop by and we can -- we will show all our technologies that we currently have for the PC market.

Okay. A couple of questions for Lars if I may. So, you mentioned an increased presence in Taiwan. Could you say how many people are in the Taiwan operation? And then I guess if operating expenses are expected to stay within this sort of $16 million for the year, is there somewhere else where you are seeing cost savings that is offsetting the increased presence in Taiwan to keep expenses relatively level?

Yes, Rob, obviously like (inaudible) we already have a team of six people (inaudible) in Taiwan. And that when it comes to the financial plan of effect on the financials it is all factored into our financial plan.

Okay. It sounded like you received some reduced costs in maybe outside consultants or legal costs or something like that.

Yes, I think I explained that in my prepared remarks as such. I will say you are right, we have some, also on top of that, some gains related to the exchange rate between the US dollars and Swedish kronor which we never can speculate about the future. But it gives us a gain and (multiple speakers).

Just two more quick ones then, Lars. One is in the roughly $500,000 of NRE this quarter, how many projects contributed to that?

It is (inaudible) but it is a handful of them and it is related to the printers, automotive, customer projects.

Okay, so a number as opposed to just one or two. Great. And finally, with respect to the auto infotainment systems where you are now shipping around half a dozen models. Can you say -- Thomas, you mentioned that (inaudible) is a little bit more expensive. Roughly what is the royalty opportunity for you on a vehicle infotainment system?

Rob, this is Dave. I think we have previously said on several calls what auto is, it is typically a bit higher than some of the others that we have, probably approaching the PC kind of stuff. And so, auto ranges from up to $3.00, $4.00, somewhere in that neighborhood right now.

Great, thank you.

Mike Malouf, Craig-Hallum Capital.

Lars, maybe I can start with you. I know that you pointed out that a lot of or all of your revenue comes in arrears, which actually gives you pretty decent visibility into the following quarter.

So I am just wondering if you can get a sense of, as we stand here now, what kind of visibility do you have in sort of the near-term here with regards to say the June quarter. And is there any kind of help or guidance that you can give us with regards to how that is progressing, especially given that HP continues to ramp. Thanks.

Mike, we will give guidance when we feel confident that we can give it. And as we understand, when we have these earnings calls we have not received the reports from our major customers. So therefore we will guide to say we feel confident to do that.

So, for instance, if you got those reports in the next week or so you might actually put out a guidance for the quarter?

I don't think so, really. But going forward, naturally we will always look into that because we would like to [secure] that we are as transparent as possible with you.

Okay, great. And then maybe Thomas, could you give us a little bit of color on where HP is in their ramp? I know that previously you have said that they were over 20 units and a year ago they were at three. I think those are roughly the numbers. Can you just give us a sense of how that is progressing and whether you are penetrating the HP product line like you are expecting? Thanks.

Yes, I think the ramp goes as expected. I think there is a couple of more printers on the market as we speak. I don't really know the exact numbers. I think it is passed 20 printers so far. The launch plans go as expected. And we are also working with HP for their (inaudible) devices and also actually replacement for (inaudible) and these type of low-cost printers. So it goes as expected.

Okay. And then with regards to diagonal inch price that you quoted, $0.25. Do you add on your license fee on top of that? So, for instance if it was a 21-inch diagonal monitor at $0.25 it would be like just over $5.00? And so, would the all-in price be roughly $10 for someone?

Yes, that is correct. I mean the price we mentioned here is the cost of the touch module. And then on top of that we put our royalty. So that's of course a combination -- our solution is really a combination of the cost of the hardware and the license fee.

So, as our cost is of course substantially lower compared to our competition, which is basically around -- at least more than $1.00, we can [show] a relatively high license fee and still be very competitive.

And also, you should remember that we have certain unique features, such as we discussed during the call, edge-to-edge kind of design, which is kind of unique for our technology. We have on-screen display functions for monitors so we can activate the MEM use instead of having (inaudible). And we have different proximity sensing into this mix.

And the more features of course we provide the higher license fee we can charge of course. And also, it's important to keep the cost of our hardware as low as possible so we can maximize our license fee.

Okay, so you will be at Computex really showcasing this touch module that other PC manufacturers can buy. Do you think there is a chance that there will be PC manufacturers showcasing products with your touch in their products at Computex this year?

Again, it is not something we can disclose or talk about. The only thing I can say, we will of course be there and we can talk about the stuff we are going to show. But we are not allowed to talk anything about our customer launch plans at the moment. But when these products come out in the market we can confirm whether we are in them or not, as we do with some other customers.

Mike, this is Dave. I know that question that you just asked is sort of on everybody's lips out there. But I think you also understand that we are in a situation that our customers don't want us front running them by announcing some sort of product release at Computex or at any point in time.

And so, it is not that we are not in contact with them, it is not any of that, but we are just not able to satisfy that type of question. I know you understand that.

That's fine. No, totally understand. Thanks a lot for taking my questions. That is all I have.

Mark Kaufman, LPS Partners.

As it pertains to your licenses and royalties, do you ever find that there is a situation where you have a license with a company -- and I have been following the Company over the years and there is an ebb and flow of who your largest customers are.

As it pertains to including a royalty over the cost of the product, do you think that that in some way hinders the product being used in the future as the product matures? Or is it really just a change in technology, one of your competitors coming up with a better mousetrap or I should say substrate or yourself by coming up with a better touch screen?

And also, a little add-on to that question. If you have a license with Amazon and new products come with some updated technology, is that encompassed under the existing license or is that -- incur a new license agreement?

Yes, I think we have talked with Amazon, this is -- as they develop new products we will charge them a license fee as we do today. So it is no different if we develop a new product. If there are two products in parallel they will still pay a license fee per units sold. That is how our (technical difficulty) work.

So it would be under a master license then that you would have with Amazon? Or as I said, is it a new product and there would be a new license for that if it incorporates new technology?

Yes, it doesn't matter what product they actually put out. It could be -- it doesn't have to be an e-reader. They pay according to the units sold or units they put on the market. So that has not really anything to do with if they do [parallel] development.

Going back to the first question, as I said earlier, the cost of our solution is the hardware part, which is you can say the sensor and then it is certain integrated circuits on plastic and some optical components. And then on top of that we charge our license fee.

And in our business model and our vision of course is to reduce the cost of the hardware portion of our solution. And the reason we are doing that is in the end if that would be zero we could be a pure licensing Company and we doesn't have to provide any hardware.

But we are not there yet, but we are working on it. And also with our latest kind of technology approaching $0.25 per inch display, we are extremely disruptive compared to any solution on the market. So it is -- that is where we are putting money and what we do development for is to reduce the cost of the hardware, but also having new kind of features that we are also alone with.

And you can see that -- our technology has changed over time to address different things, anything from steering wheel to door handles to different proximity solutions in cars. We are even in an aircraft right now. So we have sort of changed the technology and adapted to the market needs over time as well.

Thank you.

Drew Bookman, FNY Capital Management.

Exciting to hear that things are going in the right direction. And I know this has been asked before, but I just want to give you one more time to clarify it. The biggest overhang in the stock to me right now is your ability to continue running your business without having to do a dilutive equity raise.

Is there any way you can give investors comfort that this is not going to happen and why it is not going to happen so we can value this as a business instead of thinking that there is going to be a big raise coming in the near future. Thank you.

Hey, Drew, this is Dave Brunton. I think Lars over the last couple quarters has emphatically said that it is not happening. And I don't know what sort of thing you are looking for at this point. He models this, watches the cash very closely. We have sufficient cash according to every aspect how he looks at it.

Obviously cash is important to us -- it is more important to us than it is to you, believe me. And right now he is emphatic that there is no cash to be raised at this point. You know (multiple speakers).

And second question -- that is very helpful and I appreciate it. And the second question is, how can you -- how do you differentiate yourself -- I think I know what the answer is going to be -- from Uni-Pixel? Because it has been compared to before and we have noticed the share price of Uni-Pixel just keep going south and I think that has dragged Neonode down along with it.

Is there any way you could kind of explain to investors who might not understand that this is actually a different company?

Yes, I think I can answer that. To start with I would say that our Company has a long experience of this technology that we developed over the years. We have put out, our customers have put out over 20 million devices on the market. I think that doesn't apply to the company you mentioned.

So, we sort of left a startup phase and we are starting to see even products that we started developing four years ago hitting the market, like the Volvo XC90 for example.

The other thing is that we have changed our technology. Most of the capacity companies that have capacity touch technology are stuck with some kind of overlay on top of the display that distract and destroy the image quality.

The other thing you can see that we are also following the trends which is basically reducing the (inaudible) size and width on side of the display. You get a very big, large, active area and notebooks. For example, the last Dell notebook has a very, very small -- tiny vessel around display. So our zForce Air or zForce EDGE solution makes that possible.

So suddenly you can actually integrate touch into a device and you would not see a difference if there is a touch or not. But this annoying glare you can see on the monitor with touch is basically not there anymore with our technology.

So, we also are not only in one market segment, we are actually in several market segments. But our primary focus right now is the PC segment with the monitor all-in-ones and notebooks, automotive but in automotive we have a lot of different applications for our technology. And we're also working on the printer segment which we believe we're going to be the largest supplier of touch as we go. So --.

That is very helpful, very helpful. And the last question and just thinking about to myself based on Lars' analysis that I asked and that you all highlighted in my previous question. As a follow-up to the first quarter, how long -- how low do you see the cash possibly going and when? Or how long do you see it lasting?

And in and in around that, that if you saw contracts coming in and licenses coming in intra quarter, wouldn't it be a good idea to come out and announce it so people could get more comfortable with your story and have the shorts lay off of the stock? Because it should be valued higher based upon all that you are telling us.

I think like this, that I think I counted basically my view on this in that we feel confident. In fact what we have in our plan projection, which we not count (inaudible) disclose for you. That is giving us confidence that we will manage that, one part of that, for example the (inaudible) financing.

And I would say we have this carefully monitored all the time. But [very big contract]. And as part of our business model, it is to receive cash for -- and a re-project. And they are substantial in the segment. So we naturally expect that to continue.

Okay, that is fair enough. Listen, I appreciate you answering the questions. Thanks, guys.

[Paul Williams], Millennium Partners.

Congratulations. A couple of things here. Can you discuss the Bosch relationship you just mentioned?

No, we can't. We typically as we -- sometimes we are allowed to mention our customer's name, sometime not. And what we tried to do going forward is at least confirm the customers we are working with. But normally we are not allowed to discuss any kind of projects or their plans or what they are going to launch on the market.

And that is why you can see that it's been kind of difficult to [hold] into all these -- a lot of different cars coming out right now. We have been aware of that for some time, but we can't say anything. So it is quite nice to see that is happening now.

Right, that is terrific. So let's go back to Harman for example. You did mention that today as a new [licensee] agreement. Can you explain what that actually means moving forward?

It means we are developing products with them that they sell to OEMs, typical OEMs or car companies that put out the car on the market. Harman is a very big player in infotainment systems in cars. We cannot say anything about when that will happen. Or, in fact, if it even has happened. But I think as we go we will -- might put out some information about which cars and what kind of system we are in with them.

Okay. Now, will this possibly include the seat back for the back seat passengers? Is there anything that you are working on for the displays of that additionally?

Yes, I mean, as I said before, we are working with -- and in a car it is a huge opportunity for us because it has a lot of different -- it is a [total] different application we can use our touch for.

So you have, to start with, the steering wheel technology we are doing for assisted and self driving cars. You have door handles for keyless entry. We have touch sensors that activate different surfaces in the car. We have rear-door door protection; so for example, if some kid put in their hand when you close the door you have some protection that senses that.

We have rear-door sensors so you can basically just wave with your hand, it will open the back door of your car. And of course we have the infotainment system touch also with proximity sensors that you don't have to touch the display, it will be able to react before you do that. So (multiple speakers).

Wow, that is exciting. I mean, that sounds like that is even -- everything else seems like it is even more exciting than the infotainment by itself.

Yes, I think so too. For example, in door handles there are actually four door handle sensors in one car. And as we said earlier, each of the things we put into a car, it is another license fee for us. And in automotive, especially like say the steering wheel, we expect a much greater royalty level than we have today, for example, on a printer.

And if you take Autoliv, for example, they sell 17 million steering wheels per year and in 2017 I think we are see about 100 million cars on the market and each of them have a steering wheel. And with this technology you can also simplify the design. So you can actually cost reduce by taking away a lot of buttons and switches inside of the car.

So we target things in a low-cost application with the steering wheel sensor as well, not only for premium Canon devices, even if the premium car is the first that is going to hit the market.

Right. So that sounds like you are going to be pretty much possibly in the entire car at some point, your technology.

Yes, I mean it will not go -- it takes time in automotive. But we see the steady ramp, we see a lot of -- because we have a presence in the market now we have been considered to be a premium kind of technology that a lot of these car manufacturers are very happy about.

And they even market our technology themselves, talking about (inaudible), capacity that now is optical because it is much more responsive and we can use glass, for example, and it's a premium kind of technology even for low-cost cars. So, yes, it is kind of exciting.

Right, that is tremendous. Just switching over to the PC segment for a second. Obviously based upon the nondisclosure rules that you have I am sure you are dying to tell everybody about what you are doing actually, just like you weren't able to speak about the cars in the past and all of a sudden we have 10, 20 cars and even back in the day the printers you were talking about but you couldn't mention the name.

So, in other words, with the PC space it sounds like you are close and you just can't reveal the details that you would like to at this current time. Is there anything you can share as far as the -- you already have one OEM, how close you are to the other two or three or four that you could be signing? Is that days away, weeks away, they want to see the first product from the first OEM to come out?

Again --.

I know it is tough to speak, so --.

I mean it is difficult to talk about that. But I think in general we have -- if you look at our technology we have a very good product offering, very confident with our technology. We have [at the early stage] Windows 8, Windows 10 qualification.

I think worth mentioning is -- it's quite interesting, is that is that Windows 10 has a new feature which basically enables you to connect your device to a monitor. And you can send back touch information to your mobile phone from the monitor ass you basically use that as your primary touch interface.

That is an interesting feature in Windows 10. Basically it means that all the monitors going forward, together with your mobile phone, can be used as your PC. So the mobile phone is sort of transformed into your PC.

And we can see that with our solution at the cost point we are at we can start -- they can start putting touch in monitors, not changing the industrial design, not changing the cost structure, basically selling at almost the same price as without touch. So I think a lot of things can happen in this market and it is going to change -- be a little bit different than we are used to.

Okay, great. So you are currently Windows 10 compliant? Is that safe to assume you will be listed or will be listed on the Microsoft website to confirm that you are (inaudible)?

Windows 10 is really the customer that -- it qualified the whole product. So touch is just part of this whole Windows 10 qualification. But from Windows 8 to Windows 10 I think most of the specs have been relaxed quite a lot just to enable more devices to be qualified and getting the volumes up.

So, and also the requirement of testing has gone down. So it is more to the OEM now to do this testing and sometimes even testing it himself. So similar to CE Mark in our SEC approval process I would say.

Okay. So then at Computex there will be products, you just won't confirm with the customer's name or not, you just will not -- you cannot confirm that. But at the CES show there was an LG monitor with your technology. I mean that was obvious. I mean the name was on the monitor. So would it be safe to assume that we could read between the lines then?

Again, I would comment on this one and I guess our customers, when they launch their products and we are allowed to say anything about it, we will definitely do that of course.

Okay. And then final question, let's see, anything you can update us on the white goods segment?

Yes. What we have done to address this segment, we looked into it earlier. And you can say if you take a washing machine or this kind of application there is a lot of different devices coming out let's say some from LG and these companies. We cannot always do full custom design on all of these. And it is relatively low volume on each of these devices even if the total volume is quite high.

So what we have done is we have developed a more standardized kind of a module that they can use as a starting point of their design instead of doing full custom design. And we can use less resources internal also to scale better. And when we have suppliers and partners that build this thing and ship it to our customers. It is a little bit different approach than we have before. And we believe this is the right direction to go.

Okay, great. And would you -- are you on that N0 -- what is it, NN1002 or 1003 chip? Are you already at that point and you just haven't mentioned it publicly or you just haven't given us a chip update for that matter.

No, we are in development, of course, with this. And this is something that follows our business plan. When we do a new silicon we typically look at it, see how we can reduce the cost for our customers in terms of the hardware.

And I think you can see our solution has gone from let's say $2.00 per inch to $1.00 per inch to $0.25 per inch when I talk about the hardware. And that is quite aggressive compared to our competition that has been with silver (inaudible) wires or metal mesh whatever they are trying to do reducing 15% to 20% per year.

So that means we have a lot of margin to get a good royalty. Of course that is in the end that is how good our sales force is to do that. But that at least is part of our business model and our strategy to do that.

Okay, great. And is that with Texas Instruments or is that with Analog Devices or both?

We work with Texas Instruments, that is our silicon partner.

Okay. And they also have a car infotainment division. Are you at all with them?

No, we work very closely with Texas Instruments, especially in the auto space in terms of sales. We co exhibit with TI in their Experience at CES, I don't know if you were there. We showcased [head up] systems together with our steering wheel application.

And of course there is a lot of interest in that right now because of the self driving cars and assisted driving cars that already, in fact, some of them are on the market. That we need a good handle or process between the driver and the car.

So, we have a very good relationship with TI and they also provide automotive qualified components for these applications that you see on the market right now.

Okay, that is terrific. And any last shout out to the short sellers that have -- again, it is as you have always said, it will take care of itself, your business. But any further comments of the continued manipulation of the shares? I mean everyone knows that, it is just a matter of --.

Again, my focus is to build this business and bringing a successful company forward. This is a bit out of our control what the market is doing with our stock. We are just very, very focused right now to deliver products in this different market segment. So, we are active in and, of course, continue to develop technology. And I think when people start seeing that, and it's already started happening, things will change.

Okay, that is terrific. I appreciate that. And I would encourage also continued insider buying, which you guys have done over the past 12 to 14 months. And as long as shorts continue to manipulate I guess you will take advantage of the pricing -- current market pricing in order -- I would think that's -- but we will see more of that, right?

I know you guys can't answer that, but I will leave it at that. I appreciate all of the answers to my questions. Thank you very much. Great job, guys.

Cody Acree, Ascendiant Capital.

Just one quick follow up. I was looking through your 10-K -- or your 10-Q, excuse me -- and it shows HP at 30% of revenue, so about $700,000. I believe last quarter that was about 45%, so about $800,000. I would think with the ramp of new printers, new models coming to market and seasonality that that would have -- HP would have grown sequentially. Am I missing something there, looking at that wrong?

Yes. I think you are vastly overstating last quarters.

Okay, I just was going from comments made during the call. What was last quarter?

We haven't said.

What you can say, Cody, is like this, that naturally the division between different markets where change (inaudible) first to report from Amazon came in to us. So, but we see constant ramping, also increasing of those revenues. But when Amazon (inaudible) Thomas said, obviously made a pretty good start with a [new Kindle], it increased that portion [profit].

Okay, and HP revenue did grow sequentially then, is that what you are saying?

Definitely (multiple speakers).

Okay, very good, thank you.

Scott Vincent, Green River.

If memory serves correctly last quarter, Lars, you made a statement that cash balances would not fall below $4 million. Do you still stand behind that statement?

Yes, that is what I said, and that is what I stick to this time also. So I think I am quite (inaudible). And that is our absolute -- that is our belief and prediction that (inaudible) sufficient cash.

Okay, so then I would imagine that second quarter will probably represent the low in cash balances if not the first quarter?

I didn't really hear your question. I am sorry.

Sorry. So I would guess then that either first or second quarter would represent the low in cash balances?

Yes, that is correct.

Okay, that is fine. That is it. I appreciate it. Thank you, guys.

There appear to be no further questions at this time. I would now like to turn the floor back over to management for any additional or closing remarks.

Okay, thank you for listening to this call. We will keep you posted as we go. And I want to thank you all for joining us on this call. And have a good day. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.