Neonode Inc. (NEON) Q1 2015 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for standing by and welcome to Neonode’s First Quarter Ended March 31, 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [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 Lindqvist, 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, guide, 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 to say that we carried into Q1 2015 the great momentum built throughout 2014 and further solidified our opportunities in our main market segment of the multi-printer and PC. Our objectives for 2016 and beyond are to execute on the many opportunities that we're 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 segment. During this call, I'll give some color as to our customer activities within our core focus market and an update with some views on our recent technology development. 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 in 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 would take this opportunity to mention a few of the OEM brand names. We have three GM (General Motors) models: the GM Baojun 560, the Chevrolet New Cruze, the Buick Excelle XT; three JAC models, the Ssangyong Tivolan, the Suzuki Vitara, the Volvo XC90, the Haval H6, the 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 Focus. 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 car's vital functions. Volvo, for example, has taken a big leap to simplify the interaction with the infotainment system reducing the number of buttons to just seven. What this means for the driver is a greatly enhanced driving experience without the benefit of safety through reduced distractions. Being Swedish I think it's 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 after the release. It 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 hit 100 million in 2017 and we know that along with this would be an increase in new cars having infotainment systems with touch sensing technologies. For Neonode, the automotive segment represents several opportunities not only limited to touch and the sound of that infotainment system. Our previous public announcements our zForce Drive technology is being integrated into the steering wheel. However, we're 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 offer OEM something disruptive. Touch and proximity in cars has become a master feature just like air condition, car radio or ABS brakes. To stay competitive OEMs must offer touch on all of the 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 license fees 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’re doing in this segment. For our 2014 earnings Neonode has signed a contract with the leading PC OEM. There is a high level of activity for this OEM for development of products and it is progressing according to all expectations. We are expecting products to be launched in 2015 and now we’re also working with them on products for 2016. Neonode is also heavily engaged with other leading PC OEMs for products and the major PC OEMs for reference assigned platforms with launch targets of 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 dust and deal of activity our technology in the PC space especially for all in one and PC monitors. All of our customers are working on adopting out previously announced zForce EDGE design which is the only touch technology in the market that will feasibly allow true EDGE-to-EDGE zero bezel design. Neonode is in a complete class of its own in this stage and our solution addresses the stringent industrial design demands, offer the most responsive touch experience at a cost which is over 50% less than the lowest competing touch technology available on the market. We believe we have the best technology for this application and I extremely excited about our prospects in the PC market. 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[ph] 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 customer tell us we want touch to be what a built-in camera is to notebook PCs and what ABS brakes are to cars. We just want in there, but we need it with the lowest cost possible and with the same functionality. Neonode's objective is to just 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 million 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 model. At the same time, we are in product development with our other print customers with expectation that they will release printers using our touch to the market in 2016. All these development projects are going in 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 this market segments on future calls. Another segment that we are being successfully in is the e-reader business. We talked about Amazon on the last call and happy to see that the sales of their e-readers with our touch exceeded our expectations. Amazon recently announced a new entry level e-reader 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 extend beyond the U.S. market. We continue to have great relationship with Amazon and are working with them for the next devices. And now I like to move over to an update on our technology development and strategy. Consistent with our strategy we continue to invest in our technology development, which enable us to meet our company goals. I can tell you this is paying off and I'm highly encouraged with our new technology development. We have developed a new variation of zForce Air, which comes as a highly integrated module. We will showcase the zForce Air during the COMPUTEX Show in June. In short, the zForce Air module will allow the touch enablement of devices for a bill of material cost that is as low 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 per diagonal inch. Just as important this module type of design will enable us to scale and aggressively enter new market segments. zForce Air open us a whole new world of opportunities for Neonode. OEMs know that the future is all about touch but they need to 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 opportunity and the technologies to take Neonode to position of market leadership in our chosen focus market. Of course, our technology is not limited to an application, but we're committed to focusing and making sure we dominate this market first. And now over to Lars, who will talk about the financials.

Thanks, Thomas. Earlier today, we filed our Form 10-Q with the SEC and released the first quarter and 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 license fee revenues one quarter after a customer has 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 revenues for the quarter include approximately $1.8 million of license fees, $500,000 of NRE fees compared to $900,000 license fee and $100,000 of NRE fees for the quarter last year. The increase in net revenues is mainly due to license fee revenues from new product shipment of printers with HP, e-readers 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 licenses are distributed in our market, information we believe is valuable for you in understanding our business and how it developed. Well, approximately 60% of our license fee revenues for the quarter relates to e-reader and tablets, 35% to printers and 5% to automotive compared to 100% e-reader and tablet revenues 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 expenses 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 development between U.S. dollars and Swedish kroner. 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 a $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 shareholders equity is 1.8 million and they have 40.5 million shares of common stock outstanding. I know many of you have questions concerning our cash going forward. I stated in previous call that we believe our cash projections will be sufficient to operate the company. This is based on a 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 in 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 license fee revenues during this year to increase, mainly driven by growing revenues from printers with HP, e-readers with Amazon and others, PC products scheduled for release during end of 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 on the way. 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, a lot of 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 and 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’ll open the call to questions. Thank you very much for listening in.

[Operator Instructions]. Our first question comes from the line of Cody Acree with Ascendiant Capital.

Thomas, just a quick clarification, you mentioned a cost per diagonal inch, what was number?

$0.25.

And is that crossed applications regardless whether that’s automotive, PCs or what have you?

It’s slightly more expensive because we have in that because automotive qualify the components and in consumer based it is 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 some more details regarding your PC partnership?

Normally, we can't disclosure might have -- I mean, the companies we work with or the launch clients 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 for that PC partner could be very important.

It's Lars here. And you have to make it sure that we do not model in any prepayment of license fees in a financial plan to run our operation. That's the basic capital approach. However, we are always expecting significant repayment from customer project, so that’s what it is.

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

Cody, as I addressed in my prepared remarks, we believe cash to the extent with 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’s correct.

And then your expansion of 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 now 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, even if the production might be in China. But all these customers are of course, when they go into product development, they need a lot of support. And we have build an organization with sales and quality management and product management in Taiwan support it and accelerate all the -- getting products out on the market for our customers.

And then lastly, Lars, when -- what's the timing of the expected Autoliv $1.5 million 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. We have, basically, the initial $1.5 million will be amortized over the 12 months target starting from 1 of April. And the remaining $1.5 million is connected to milestones [indiscernible]?

No, I guess I'm 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. This is 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.

Thank you.

Our next question comes from the line of Rob Stone with Cowen & Company.

Hi guys. First question for Thomas. You mentioned the new version of zForce Air in a modular fashion. I guess you've been working on PC products for a long time. It's taken a while to get to visibility on first product shipping, which I guess is 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 displays. So it's 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 the 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 expect 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's a Monitor it's less than that. If it's an All-In-One PC, it's typically the same size, same time. If it's the keyboard and keys application can be less, down to a month. So it depends a little bit on application.

Okay. And 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 they launch plans. But we, of course, are very excited about things we're doing with the PC. And as I've said before, we're also working with just one customer, there is lot of different customers we're working on.

Okay.

And again, we can't really go before time and tell the market what they are going to do. But we are working with the few customers and some customers are planning to put products on 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 buy, and we can -- we'll show all our technologies that we currently have for the PC market.

Okay. 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 the sort of $16 million for the year, is there some more out where you are seeing cost savings that is offsetting the increased presence in Taiwan to keep expenses relatively level?

Yes Rob. Obviously, I would say like this that we already have a team of six people up running in Taiwan. And that -- when it comes to the financial plan or the effect on the financial, it is all in fact into our financial plan.

Okay. It sounds like you were seeing some reduced cost in maybe outside consultants or legal cost or something like that.

Yes. I think I explained that in my prepared remarks section. I would say, you are right, we have some -- also on top of it some gains related to their exchange rate between the U.S. dollar and Swedish kroner, which we actually never can speculate about the future. But it gives us a gain and that all is well.

Okay. And just two more quick ones then, Lars. One is in the roughly $0.50 million of NRE this quarter, how many projects contributed to that?

It is -- I will not encourage that, but it's a handful of them and it's related to the printer and 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're now shipping around half a dozen models, can you say -- Thomas, you mentioned the automotive segment as a little bit more expensive. Roughly, what is the royalty opportunity for you on a vehicle infotainment systems?

Rob, this is Dave. I think we have previously said in -- on several calls what auto is, it's 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 to $4, somewhere in that neighborhood right now.

Great. Thank you.

Our next question comes from line of Mike Malouf with Craig-Hallum Capital.

Great. Thanks guys for taking my questions.

Yes.

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

Mike, I -- we will give guidance when we feel confident that we can give it. And yes, we understand that when we have this earnings call; we have not received the reports from our major customers. So, therefore, we will guide the day 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 you to feel [ph] that we are as transparent as possible with you.

Okay. Great. And maybe Thomas, could you give us a little bit of color on where HP is and their ramp? I know that previously you've 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're penetrating the HP product line like you're expecting? Thanks.

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 its surpassed 20 printers so far. The launch plans goes as expected and we are also working with HP for their upcoming devices to license and also actually replacements for touchless and these type of low-cost printers. So it goes as expected.

Okay. And then with regards to the diagonal inch price that you reported $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'd be like just over $5, and so would the all-in price be roughly $10 for some one?

Yes, that's correct. I mean that the price we mentioned here at the cost of the touch module. And then on top of that we put our royalty. So that of course the combination, our solution is really a combination of the cost of hardware and the licenses. So our cost is of course substantially lower compared to our competition which is basically around at least more than $1. We can charge a relatively high license fee but still be very competitive. And also you should remember that we have certain unique features such as, we discussed during the call, EDGE kind of design which is kind of unique to our technology. We have onscreen display functions for monitors so we can activate the menus instead of having buttons. And we have different proximity sensing into this mix. And the more features of course we provide higher license fee we can charge of course. And also important to keep the cost of our hardware as low as possible so we can maximize our license fees.

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

Mike, this is Dave. I know that that question that you just asked is sort of on everybody's lips out there, but I think you also understand that we're 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's not that we're not in contact with them. It is not any of that but we are just not able to satisfy that type of a question. I know you understand that.

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

Our next question comes from the line of Mark Kaufman with 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've been following the company over the years and there is a ebb and flow of who your largest customers are. As it pertains to including the royalty over the cost of the product, do you think that that's some -- it some way hinders our product being used in the future as the product matures or is it really just a change in technology some, one of your competitors coming up with a better mouse trap for I should say touch screen or yourself coming up with a better touch screen? And also 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 licenses or does that incur a new license agreement?

Yes, I think if we talk with Amazon, they just -- they develop new products; we will short stem a license as we do today. So it’s no different, it’s we developed a new product. If there are two products in parallel, they will get licenses per unit the power business will work.

So it would be under a master license then you would have with the Amazon or is that there a new product in there and there will be a new license for that with the corporation 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 unit sold or unit put on the market. So that [indescribable] except that they are 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 it stop down integrated circuits on plastic and some optical component. And then on top of that, we charge a 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’re doing that is in them the start will be zero, we could be pure licensing company. We doesn’t have to provide any hardware, but we’re not there yet. But we’re 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's -- that is where we put in money and what we do development for is to reduce the cost of the hardware, but also adding new kind of features that we are also alone with. And you can see that -- our technology has changed overtime to address different things. Anything from steering wheel to door handles, and those different proximity solution in cars, there even in aircrafts right now. So we have sort of changed the technology and adapted to the market needs overtime as well.

Our next question comes from the line of Drew Bookman with FNY Capital Management.

Exciting to hear that things are going in a 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 thing overhanging 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’s 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 of quarters has emphatically said that it’s not happening. And I don’t know what sort of thing you're 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 and it is more important to us than it is to you, believe me. And right now, he's emphatic that there is no cash going to be raised at this point.

And second question. That’s very helpful and I appreciate it. The second question is how can you -- how do you differentiate yourself. I think I know what the answer is going to be from Unipick[ph], because that has been compared to before. And we’ve noticed the share price of Unipick also must keep going south and I thing that’s dragged Neonode down along with it. Is there any way you could kind of explain to investors that 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 long experience of the technology that we developed over the years. We have put out, our customer have put out over 20 million devices on the market. I think, that doesn’t apply for the company you mentioned. So we put our left startup phase and we’re 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 capacitors company, the capacity-touch technology are stuck with some kind of overlay on top of display that distracts and destroy the image quality. The other thing you can see that we are following the trend, which is basically producing the best of size and width on side of the display to get a very big, large active area on notebook. For example, the last Dell Notebook has a very, very small, tiny bezel around display. So our zForce Edge solution makes that possible. So suddenly you can actually integrate, touch on the device and you would not see a difference if there is a touch or not. So this annoying glare you can see on the front of monitor with touch is basically not there anymore with our technology. So we also are not only in one market segment, we’re actually in several market segments, but our primary focus right now is the PC segment with monitor all-in-one notebook. 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 could be the largest supplier of touch as we go. So…

That’s very helpful. And the last question and just thinking about to myself, based on Lars' analysis that I asked, that you highlighted 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 around that that if you saw contracts coming in and licenses coming in enter a 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 this short way off of the stock because it should be valued higher based upon all that you’re telling us?

I think like this. I think account basically, my view on this and that would be confident and that’s what we have and up to them as for reaction which we – actually not count say, disclose for you. That is giving us confidence that we will manage that and one part of that, for example, [indiscernible] financing and I will say we have this carefully monitor all the time. We feel confident. And as part of our business model it is to receive cash for NRE project and they are substantial in these segments so we naturally expect us to continue.

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

Our next question comes from the line of Paul Williams with Millennium Partners.

Couple of things here. Can you discuss the Bosch relationship you just mentioned?

No, we can’t, we typically -- as we, sometime we are allowed to mention our customer’s name, sometimes not. And what we try to do long format especially confirm the customers we are working with. So normally we are not allowed to discuss any kind of project or their plans or what they’re going to launch on the market and that’s why you can see that kind of a difficult [indiscernible] to all this a lot of different cars coming out right now we've been aware of that for some time but we can’t say anything. So it’s quite nice see that happening.

Right, that’s terrific. So let’s go back to HARMAN, for example, you did mention that today as a new license agreement, can you explain what that actually means moving forward?

It means we are developing product with them, that itself is an OEM. Typically, OEMs are car companies that put out the car in the market. HARMAN is a very big player in infotainment systems in the cars. We cannot say anything about when that will happen or in fact this has 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, we don’t know.

Okay. Now will this possibly include the seat back for the backseat passengers, is there anything that you’re working on for the displays of that additionally?

Yes, I mean, as I said before we are working with -- in the new car it is a huge opportunity for us because it does a lot of different -- a lot of different applications we can use our touch for. So you have to stop with this steering wheel technology we’re doing for assisted and self-driving cars; you have door handles with key less entry. We have touch sensors effective at different surfaces in the car, we have rear door protection. So for example, if some kids put in their hand when you close the door you will have some protection that senses that. We have rear door sensors so you can basically as wave with your hand it will open the back door of your car and, of course, we have the infotainment system touch that also with proximity sensors that you don’t have to touch the display, it will react before you do that. So --

Wow, that’s exciting, I mean that sounds like that’s even everything else seems like it’s 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 car is another license fee for us and it’s in automotive especially like the steering wheel we expect a much greater royalty level than we have today for example on the printer. And if you take Autoliv, for example, they sell 17 million steering wheels per year. And 2017 I think we see about 100 million cars on the market and each of them have a steering wheel, and with the 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’re targeting even low cost application with the steering wheel sensors as well, not only for premium cannot be licensed, even if the premium cars is the first that going to hit the market.

Right, so that sounds like you’re going to pretty much possibly in the entire car at some point your technology.

Yes, I mean, I mean it will not go, it takes time in automotive, but we see that steady ramp and we see a lot of, because we have a presence on the market now. We have been considered to be a premium kind of technology that allow these car manufacturers [indiscernible] and they even market our technology themselves talking about receptive first capacitive now is Opticon regardless much more responsive and you can use glass for example. And it’s a premium kind of technology even for low cost cars. So yes, it's kind of exciting.

Right, that’s tremendous. Just switching over to the PC segment for a second, obviously based upon the non disclosure rules that you have, I'm sure you are dying to tell everybody about what you’re 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 on the day the printers you were talking about but you couldn’t mention the name and it's -- so in other words with the PC space it sounds like you are close and you just can’t reveal the details that you’d like to at this current time. Is there anything you could share as far as the, here you 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 that come out?

Again --

I know it’s tough to speak so.

I mean it’s difficult to talk about but I think in general we have -- we you look at our technology, we have a very good product offering, very confident with our technology. It passed early stages Windows 8, Windows 10 qualification. I think worth mentioning is quite interesting as that is the Windows 10 have a new feature which basically enables you to connect to your device to a monitor and you can send back touch information to your mobile phone from the monitors, you basically use that as your primary touch interface. And that’s an interesting feature in Windows 10, basically it means that all monitors going forward together with your mobile phone can be used as your PC, so the mobile phone it sort of transform into your PC. And we can see that with our solution as a cost point where we are we can start putting touch in monitors not changing the industrial design, not changing the cost structure and basically selling almost the same price without touch. So I think a lot of things can happen in this market and its going it change, we look it different than we are used to.

Okay. Great. So your currently Windows can compliant is that safe to assume you’ll be listed or will be listed on the Microsoft website to confirm that you are just like…

Windows 10 is really the customer that, we qualify the whole product so touch is a part of this whole Windows 10 qualification, but from Windows 8 to Windows 10 I think most of the specs has 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’s more to the OEM now to do this testing and sometime even testing themselves. So similar to CE mark, you know, FCC for that 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 Fiat 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…

Okay.

I guess our customers when they launch the product and we are allowed to say anything about that 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 the rest of this segment, we looked into it earlier and you can see, if you take a washing machine or this kind of application, there is a lot of different devices coming out let’s say, Samsung, LG and these companies and we cannot always do full custom design on all of this and there is relatively low volume on each of these devices even if the total volume is quite high. So what we have done is that 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 resource internally also to scale better and when we have suppliers and partners that build this thing and ship it to our customers. Just a little bit different approach that we have this for and that we believe this is the right direction to go.

Okay. Great. Are you on that N0, what is that NN1002 or 1003 chip, are you already at that point and you just haven’t mentioned it publically 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 follow our business plan. When we do new silicon we typically look at it see how we can reduce the cost for our customers in terms on the hardware. And I think you can see our solution has gone from let’s $2 per inch to $1 per inch to $0.25 per inch, when I talk about the hardware, and that’s quite aggressive compared to our competition that’s being with still built on of wires or metal mesh or whatever they’re trying to do reducing 15%, 20% per year so. That means we have a lot of module to get a good royalty. Of course -- and then that’s how good our sales force is to do that but that really is part of our business model and our strategy to do that.

Okay. Great. And is that what Texas Instruments or is that with Analog Devices or both?

No, we work Texas Instruments, that’s 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 Instrument especially in auto space even in terms of sales. We co-exhibit with TI in their experience on TS [ph] I don’t know if you were there. We showcased [indiscernible] systems and 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’s already intact some of them on the market that means a good handover process between the driver and the car. So we have a very good relationship with TI and also provide automotive qualified components for these applications that we see on the market right now.

Okay. That’s terrific, and any last shout out to the short sellers that have again it’s as you’ve already said it will take care of itself, your business, but any further comments of the continue manipulation of the share? I mean everyone knows that, it’s just a matter of…

Again, my focus is to build this business and bringing a successful company forward. This is bit out of our control what market is doing with our stock. We are just very, very focused right now to deliver products in the different market segment so we are active in and of course continue to develop technology. I think while businesses have seen that and is always starting happening, things will change.

Okay. That’s terrific, I appreciate that, and I would encourage also continue 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’ll take advantage of the pricing current, market pricing, I would think that’s, we’ll see more of that, right? I know you guys can't answer that but I’ll leave it at that. I appreciate all the answers to my question. Thank you very much. Great job guys.

Our next question comes from the line of Cody Acree with Ascendiant Capital.

I was just looking at your 10-K -- 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, current new 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’re vastly over stating last quarters.

Okay. I just, I was -- they were from comments made during the call with the -- was last quarter?

[Indiscernible].

What you can say, Cody, it’s like that naturally the decision between the frontend markets [indiscernible] I am not the first to report so I am not telling it came -- to us so, but we see constant ramping and also increasing of those revenues but when Amazon that have to co-enter [indiscernible] obviously, we made quite a good start with the camera; it increased that portion.

Okay. And HP revenue did grow sequentially, is that what you’re saying?

Definitely. Definitely.

Okay. Very good. Thank you.

Our next question comes from the line of Scott Vincent with Green River.

If my memory serves correctly, last quarter, Lars, you made a statement that cash balances would not be lower than $4 million, can you still stand behind on that statement?

Yes, that’s what I said and that’s what I speak to this time also. So I think I'm quite confident and after that -- that's our belief, and reaction that’s what we do [indiscernible].

Okay. So then I would imagine that second quarter would probably represent the low in cash balances, it’s not the first quarter?

I didn’t really hear your question, I'm sorry.

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

Yes, that’s correct.

Okay. That’s fine. That’s it. I appreciate it. Thank you, guys.

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

Okay. Thank you for listening to this call. We’ll 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.