Neonode Inc. (NEON) Q4 2015 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for standing by. And welcome to Neonode's Fourth Quarter and Year-Ended December 31, 2015 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 fourth quarter and year-end 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, 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 maybe involved or 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. I am really pleased with the development of the Company and we have made substantial progress during 2015. We increased our revenues 136 percent to $11.1 million compared to 2014. Our core licensing business is growing and we expect it to continue to expand. We have extended our customer base with new market segments. In addition, we made substantial investments in developing and industrializing our technology to make plug-and-play sensor modules for our customers. So why are our modules important? And why are we going in this direction? First, we will improve scaling by delivering standardized product offerings. We can reduce time to market for our customers, as the module is easier to integrate. We can address new market opportunities including the after markets. We will be able to do better forecasting with improved revenue predictability. We will strengthen our competitive advantage and control a greater part of the value chain for our solution. As a result, we expect to see increased revenues and profits. In December, we launched our first sensor module, AirBar, an accessory touch module for the PC market. AirBar has created a lot of interest from consumers, retailers and distributors from all over the world. We believe that with our current licensing business and our solid developed module business we have all the critical elements in place for us to achieve profitability. And now I would like to move over to our Automotive business. It is progressing very well. And it´s exceeding our expectations with an increase of 18 cars that were launched during 2015. At the 86th Geneva Motor Show last week there were no less than 12 new cars on display using our technology. We added a few more in the first quarter of 2016, as right now we are in total of 26 car models. To mention a few, we are in the new Chevrolet Sail, the Buick Hideo, the Geely NL-3, Suzuki CF, S-Cross and Baleno and the SsangYong Korando and the Volvo S90 and XC90. We had a nice revenue ramp in 2015 from our automotive business from zero to $1 million in revenues with over 340,000 cars delivered. We expect the revenue ramp to continue in 2016 as existing models along with new models gain traction. Infotainment with touch is now standard with most brands. Our technology support wet hands, gloved and fingernail operation, it has a very nice speed and soft touch. So, we believe we have the best touch solution on the market that meets the high requirements from our customers in the Automotive business. We have been investing in developing new products and solutions for the Automotive market. We are in development with the world’s largest suppliers of entry systems. Our sensor modules enable gesture controlled doors that eliminate the need for door handles and at the same time enhance the user experience with improved safety. More and more cars with knobs and buttons are moving towards a gesture based user interface to control the car. And our technology is perfectly suited to offer our customers high performance sensing both inside and outside of the car. Neonode’s successful cooperation with Autoliv to industrialize our steering wheel sensor module ensures that tested and certified steering wheels with our sensor modules will become available in the market on a wide scale within the next few years. At CES in January Autoliv showed fully self-driving cars with our steering wheel sensor module controlling the handover process between the driver and the car. This technology is predicted to revolutionize car user’s safety and transportation in the future. Neonode is in pole position with these sensor modules that will enable the usage of self-driving cars in a safe and intuitive way. We are in discussions with some of the largest OEMs in Europe, Asia and in the United States for integration of our steering wheel sensor modules in their cars. During 2015, the number of printers in the market using our touch has increased by over 200 percent from 1.7 million in 2014 to 5.6 million units in 2015. As of today we are in 51 printer models, not including the recently announced 15 new printer models from HP. Our second printer customer, Lexmark, has launched seven new models of their next generation printers, the CS and CX700 Series, the 800 and 860 Series. All features our new easy to use user interface powered with our technology. During 2016, we expect new customers to launch printers throughout 2016 and expect our revenues to increase from the printer business in 2016. Some of our customers already in 2016 transitioned into using our new sensor modules designed specifically for printers. These modules greatly simplify integration and time to market for our customers. We expect over time all of our customers to move over to use our sensor modules in their office equipment products. During the last couple of years, we have been investing heavily designing technology especially for the PC market. We have developed a solution for this market to support large display products like Monitors and All-In-Ones, but also medium sized displays like notebooks and small displays for keyboards with touch. The most important outcome from our efforts is that we now have a solution that can address the full PC market. Not only the 500 million notebooks that according to Microsoft is already on the market, but also the 140 million new notebooks sold every year without touch support. For the PC market we support both Windows 8 and Windows 10 devices and also the growing market for Chrome OS and Android powered notebooks, and also USB sticks PCs that is connected to a display. Our sensor modules can also be embedded into PC devices for OEM customers that prefer to have them integrated into their design. The solution for the PC market that I am talking about is AirBar. AirBar is a slim consumer electronics device designed to touch-enable any new or existing notebook PC, as you simply attach it to a display and connect it with a USB plug. It's truly plug and touch. AirBar enables full function touch where the users can sweep, tap, select, pan, pinch and zoom. You can use your fingers, a stylus, you can use your hands with gloves on and even a paintbrush. AirBar brings affordable functionality to new and existing devices. The module will initially be available for notebooks with sizes in 11.6, 13.3, 14, and 15.6 inch displays and can be sold standalone for consumers with existing notebooks and bundled with new non-touch notebooks for added value and functionality. To scale our volumes and bring AirBar to the mass market we have signed a distribution agreement with Ingram Micro, one of the largest worldwide technology distributors. We are partnering with Ingram in North America, Europe, India, Asia and Australia. Ingram will be our direct customer and fulfillment partner. Ingram will supply AirBar to all of their customer base consisting of thousands of retailers and also supply AirBar to value-added resellers, which address the enterprise and educational segments. Ingram Micro will also do fulfillment for third-party PC OEM online stores such as Microsoft, Lenovo, Dell and HP. We’re also investigating the demand for PC accessory OEMs to cobrand AirBar with their brands. This represents a great opportunity to leverage existing established brands to build greater sales in our own brand. We expect to ship the first AirBar in the second quarter in 2016 and ramp up during the rest of the year to meet expected demand. We have invested in the manufacturing process with a high-tech qualified production partner that already builds consumer and automotive products. We see demand from our customers for us to deliver fully tested modules, so we have invested in the manufacturing process to secure the quality. As of today, we have over 10,000 preorders from our AirBar Web site and we expect to deliver our first AirBar units in the second quarter. We are working together with Ingram Micro to set the forecast for the rest of the year and align the production to meet the demand. For more information you can go to the AirBar Web site where you can find videos and other details about the product. We know there has been a lot of speculation surrounding our gesture based patents, especially with the recent rulings in the Samsung vs Apple lawsuits around the world. I’d like to end with saying that we are talking to the top legal firms exploring our opportunities. With that said, I’d like to turn over to Lars for a financial update.

Thanks Thomas. Earlier today we filed a Form 10-K with SEC and released our fourth quarter and year-ended December 31, 2015 financial results and press release. Both of these are available for download from the investor sections of our Web site at neonode.com. During the last year, we have invested considerable amount of capital developing our plug and touch sensor modules for our customers and industrializing our solution offerings for mass production. The effect of providing an integrated and standardized sensor module in different sizes reduces the need to provide full custom design solutions for every customer project which makes the delivery of a solution much more competitive and cost efficient. This standardization not only has opened up new market opportunities, it also allowed us to reduce our overall cost structure without no impact on our ability to serve our customers. We expect the Company to be profitable in 2016, from the revenues from existing customers combined with improved cost efficiencies. In addition we currently have over 10,000 preorders for AirBar at $49 per unit from our Web site which will be prepaid before the start of shipping in the second quarter of 2016. Let me now talk about the fourth quarter. Our revenues increased more than 70 percent compared to last year. The revenues were 3 million compared to 1.7 million for last year. Our revenues for the quarter includes 1.8 million of license fees, and 1.2 million of NRE fees compared to 1.2 million license fees and 500,000 of NRE fees for the same quarter last year. The increase in revenues for the quarter as compared to 2014, is mainly due to royalty revenues related to printers and automotive customers combined with NRE fees primarily for automotive projects. Our royalty revenues for both of these markets have increased during the year and are expected to continue to do so as new printers and car models are released to the market. The license fee revenue distribution per market for the fourth quarter of 2015 was 36 percent for printers, 38 percent for e-readers and 26 percent for automotive compared to 47 percent for printers and 52 percent for e-readers and finally 1 percent for automotive for last year. Cost of revenues for the fourth quarter increased by 283 percent compared to the same quarter last year. Costs were 1.8 million compared to 469,000 for the last year. Our cost for the fourth quarter 2015 includes a one-time write off of 1.2 million related to costs to develop our zForce core platform as we now would use zForce PLUS and AIR in the current and future developments. Operating expenses for the quarter decreased by 17 percent to $3.8 million compared to 4.3 million for the same quarter last year. The decrease is primarily due to favorable exchange rate between the U.S. dollars and the Swedish krona. Our net loss for the quarter including the one-time 1.2 million write-off was 2.6 million as compared to a net loss of 3.1 million last year. So let me now talk about the full year 2015. Our year-over-year revenues increased by 136 percent to $11.1 million compared to 4.7 million for 2014. The increase is related to shipments of printer products and automotive infotainment systems combined with an increase of NRE fees for new projects primarily coming from automotive customers. Our full year revenues include 7.1 million of license fees and 4 million of NRE fees compared to 3.1 million of license fees and 1.6 million of NRE fees for 2014. The license fee revenue distribution per market for the year ended December 31, 2015 was 38 percent for printers, 48 percent for e-readers and 14 percent for automotive compared to 33 percent printers, 66 percent e-readers and 1 percent for automotive in 2014. Our net loss for the full year was $7.8 million compared to a net loss of 14.2 million in the same period last year. Our operations used approximately $8.1 million of cash during the year compared to 11.9 million for 2014. Cash and accounts receivables totaled $4.4 million at December 31, 2015 compared to 7.2 million at December 31, 2014. Common shares on a fully diluted basis totaled approximately 46.5 million shares on December 31, 2015 compared to approximately 45.7 million shares at December 31, 2014. Now I would like to turn the call back over to Thomas for some closing comments.

Thank you, Lars. This concludes our prepared remarks and we’ll open the call for questions. Thank you very much for listening in.

[Operator Instructions] Our first question comes from Rob Stone with Cowen & Company.

First question is for Lars. I wanted to ask you about, in the fourth quarter, if you could just talk about the cash versus non-cash expenses. I assume for instance the 1.2 million that was a one-time cost in cost of goods sold is a non-cash item. I imagine there might have been some stock-based compensation and so forth. So what were cash expenses and cost of goods in Q4 please?

Let me explain a little bit. The fourth quarter as Thomas indicated - and me too - that we spent and maybe accelerated our efforts to really conclude the AirBar module development, which means that we even brought in extra resources in the form of consultants and so forth to get it all done. That was a big effort. We’ve also went through and basically reviewed the reasoning around the write-off which we think is a decent action to take when we move from zForce Core to zForce PLUS and AIR. And, we come to our operating expenses, in total they are and have been planned over 2015 on quite high levels. But we now have had to in order to initiate it, actions to basically get a cost efficiency going. Total cash, yes and basically also why it´s very essential that we do all this and stay with what we stated earlier, to be cash flow breakeven in Q1.

Okay. So if you had a big push in the fourth quarter getting AirBar ready can you give us the sense of what we should expect sequentially for operating expenses? I think all together it was around 2.7 million-2.8 million something like that in Q4. Can you give us a sense of how much of that might have been one-time or extraordinary expenses?

Yes, the operating expenses was really more than 2.7 million it was higher, but we have talked about earlier if you’d recall and which I think, that we have a cash OpEx of approximately 4 million per quarter. With this change which we’re going through now to simplify the process of standardizing the application and all of that, it gives us the best, that is the target, to get this down to some $3 million in a quarter or two and we’ve already started to take actions since the full year and first thing is on taking out all external consultants that we used for the development that we now have concluded.

OK, excellent. So you’ve already got, as you mentioned, the first 10,000 preorders from your Web site for AirBar. Can you give us a sense of what you expect the margin contribution to be for this - for the retail portion of your product? I imagine you’re still working out all the details with distribution and OEMs and so forth. But on a $49 Web site sale what kind of margin contribution are you expecting?

Well, what I can say Rob in fact is that I mean 10,000 preorders is what we have today and we see that growing every day. I think yesterday it was some 500 more orders coming in. So we expect it to increase maybe it will be more like 20,000 units which for sure is first priority, what we will focus on, during the second quarter to get those customers serviced with a $49 price. And I will not talk into the margin on this, but we feel we have that it at a qualified and attractive level.

OK. And finally a question for Thomas, I don’t want you to feel left out. You have a nice ramp going on the vehicle displays, you mentioned the number of new cars and the demonstrations of the steering wheel I guess we’re still talking another couple of years probably before those type of vehicles get commercialized. But where do you see the revenue opportunities otherwise in the meantime, for instance you mentioned replacing door handles and so forth. If you could give us a sense of where, past the displays that are already in revenue, what application might be the next driver for automotive revenue for you?

Yes. We are looking at also the aftermarket for cars in the same way we do with the AirBar product for consumer electronics. There are a lot of different opportunities for anything from actually sensor steering wheels to the aftermarket, it's something that is getting more and more interesting. You have the tail gate sensors that you open your back trunk with that is something that can be done for the aftermarket. And of course we are looking at entry systems already this year and are working our way with some of the major players in this industry. And then there are a couple of other opportunities we’re working on. One is the rear - the back side of the window in the car that we’re using a version of AirBar to support touch on and that’s also an aftermarket product that is very popular in China right now. So basically you have a camera looking back and then you can see that camera in your back seat window.

Great, thank you Thomas. I'll jump back in the queue and let someone else go. Thanks.

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

Great guys and thanks for taking my questions. Maybe we can focus a little bit on printers. When I look back on some of the things that when I look back on third quarter of 2014 your commentary was is that we were in 12 printers at that time. And over the next five quarters we averaged about 700,000 quarter. Meanwhile we marched every quarter up to what you just announced now and 51 models now. And with the models going up quarter after quarter from just 12 to 51, and the penetration continuing to expand, why are the revenues not expanding in printers?

Okay. Hi Mike, Lars here. So I would say like is that we as you recognized and also assumed that HP basically reported a slowdown, or a decrease, in the overall printer sales. And we also know that they have been a consumer partner of big extensive restructuring and so forth. But if you look into what we have we do show quite a distinct growth if you compare it to 2014. And during ’15, maybe a little bit flat not increasing, a little bit bumpy, so but still it is better than this slowdown that HP themselves have had. [Multiple Speakers].

And we expect, which is maybe more important, that during 2016 it will increase the whole printer segment revenue, including HP. Because it also is different price ranges depending on which models they are, low-end, mid or high. So all-in-all with all the new guys coming in we have really seen progress during 2016 and we expect the printer segment to show a nice growth.

Yes. Okay. And then on the NRE side, you had a quite a bit from Autoliv this year. And I am just wondering as you look out into 2016, what kind of visibility do you have on the engineering design services line of your income statement?

Yes, I would say that going forward as you can understand where we - in general so to say - is leaving more of the customization of the customer project, with maybe one exception, that is the longer lead time that are complex automotive related or system related projects which go on for a couple of years. And the relation we build up with Autoliv is nothing that just stops now, this is a journey that continues until, for steering wheel part, at least until 2018 and this project has added also a lot of OEM related, and parallel projects. Naturally they are coordinated with Autoliv and so forth. So I would say that that we have quite a big view on how that looks for the year.

And do you think that that line which was just over 4 million for 2015 will be up in 2016 or flat? Or can you give us a sense of what you think that number will be?

I think like this that, I don’t expect going forward long-term, that that will increase, but it will be a substantial amount of U.S. dollar in NREs for sure. But over the transformation period now for maybe 12 to 24 months when modules get in and so forth, it will change and go down because the customization will be less. But during this year let’s say it will be there especially for these high complex projects. Module and revenues will grow and take that part.

OK. And did I hear you say that you expect to be cash flow positive in the first quarter 2016?

That is correct.

And then my last question is on the auto side. How many of those 26 models that you’ve made design wins into are actually shipping currently right now?

Hello, this is Thomas here. So, we have about 10 of these in full production and we had on the recent Geneva show here we added another 12 new cars, so it's a total of 26 released to the market and approximately 10 of these are in production.

OK, great. Of those 26, do you have an idea of what that encompasses on a unit basis, if it was on an annual basis, if they were actually released? I know that most of the autos are pretty good about forecasting within a range of their sales. Do you have an understanding of what that would equate to?

Yes, we can say that you saw the growth, we expected about 200,000 cars for 2015 and we’re expecting about 1.3 million to 1.5 million cars for 2016. And we’ll see if that’s something which actually will be exceeded or not, but for 2015 we actually exceeded our expectations quite a lot as you heard in my prepared remarks earlier.

Okay, great. I am sorry, I have one more question. Ingram Micro was announced on a European basis, but I never, I didn’t see that you were doing it worldwide. Is that new news today? Or did I just miss that?

Yes, it was in my, in our conference call here so I said that we signed with Europe and we were quite ready now also with U.S. and we have India, Australia and North America and also Asia. So this is going to be worldwide with Ingram. And they also have their customers like Amazon and Best Buy and so on, so it's basically - we reach out to the whole market.

That's fantastic. OK, great. Thanks a lot.

[Operator Instructions] Our next question comes from Tom Zeifang with Lucrum.

Hey guys. I am trying to get at how you’re going to ramp sales to get breakeven from a product standpoint, autos, printers, AirBar and e-readers. Can you help me out in getting from the current run rate exiting 2015 to getting to if you end up keeping NREs flat year-over-year in 2016 versus ’15, that means you’re going to have a dramatic increase in revenues in 2016.

Lars here, well, first of all as we talked about earlier that during in 2016, which we already entered into, we see the nice continuation of the growth in automotive for sure. And that will take us into the e-reader business, we do not expect that to change as such being at a big lift, but it remains on a quite nice level as such. And then comes the printer segment and the new printer launches with HP plus the other ones launching. Basically we are finalizing the development work for those guys now, and they are basically soon or more or less going into preproduction phase. Then we come to the AirBar, the AirBar well that is for sure a very exciting thing for us and we believe extremely much in it and this has been a very attractive offering to the PC notebook market at the first phase. So, what did we do? Well, we’re already gearing up for the manufacturing and all that stuff for starting up manufacturing already in April. We have the 10,000 pre-orders, actually it will maybe go up to 20,000 pre-order units. The first ones we serve are those customers. They will pre-pay those orders 30 days before they get the delivery. You can calculate yourself what that means. And next phase is that we work at parallel together with Ingram Micro to lining up the big growth phase that we expect to start up in the third and fourth quarter. First step is to get it up and running production wise, and get the units out. The first units out in the second quarter. And then have the production line up for the big deployment of AirBar. [inaudible] And also the interest we have from our printer customers and other customers to really get the module in as soon as ever is possible.

So on the AirBar inventory will that ever hit your balance sheet?

That will hit our balance sheet, yes.

But your inventories are basically static sequentially?

Yes. And that depends like I say, that is if you grow you grow - we are not doing any production - we never do it on speculation. Everything we produce will be based on - basically purchase orders, purchase order coming from Ingram Micro and we have the Web site orders which are prepayments. So all of that is basically lined up and tuned into the process.

So going forward when will you recognize revenue for AirBar if it comes through the Ingram Micro channel?

Well, it is, these things we’re looking into, as expected the details how to accounting to go into the U.S. GAAP and as such. But, and I will not go into the details about the agreement we have with Ingram as such, but we all know that U.S. GAAP and SEC will not be on exactly revenue recognition and so forth, that is we’ll have to review and so forth. But that is what it is and we need to adopt and adapt and [inaudible] but that’s not an issue for me.

So I am trying to figure out when will we see an inventory build? Will we not see an inventory build because it will come in? You build the order. You ship it. And you recognize revenue, so you will never be -- need the cash flow to build inventory, that’s what I am trying to get at?

First of all, we have to inform that we expect to be cash flow positive in the first quarter and on top of that we know naturally that the manufacturing part will drive working capital need and so forth. But we do not speculate, we do it on a purchase order. We bank with purchase orders which are always welcome with the bank. So, financially it's a working capital mechanism that we need to monitor and we are fully aware of that.

OK. Can I go for a clarification on the auto 2016 unit demand, I think you said for 2015 you recognized $1 million and it was 340,000 units, cars, comes out to about a $3 ASP. Did you say for 2016 it will be 1.3 million to 1.5 million units or dollars?

We said it would be 1.3 million to 1.5 million units.

And for the ASP should it be 3, or are you putting more content in each car?

No, basically I would say that you can calculate yourself on average of 3 would be realistic.

So you’re going to go from 1 million to simplistically $4 million to $5 million just in 2016 with existing install base of cars under contract?

Yes, correct.

OK. And then on the printers, someone asked the question before, how can you be adding so many models but not increasing revenues? So can you go over that again because I didn’t understand your response?

Well, first of all we do increase substantially from 2014 to 2015. And then looking into the quarter over quarter 2015 it's not been that a strong increase as such. But if you look in on the same time into HP’s information to the market about the decline and so forth. We did not decline. We had big growth and it's moving upwards. And you also need to understand that they’re different models where some are smaller with smaller touch area and so forth. Some are big, and those have a different price range depending on the product and where we price it. So then there is many different aspects to consider and factor in and we have a very, I would say they have over 200 percent growth compared '15 or '14, so we are expecting to see a growth going forward. And we’re adding to that when we are putting in our own modules. Which all our printer customers want to have as soon as possible. Then you could say, then our revenues will increase because then we also will have the ASICS part of the value flow. Which today is something that a 3rd party delivers and sells to the customers with our technology. That will be added into our revenue stream. Which is a nice add on to what we have today. That's a way of protecting our profitability - our revenues and profitability.

OK, thank you very much. I'll get back in the queue.

Our next question comes from Eric Feldman with Axiom Capital.

I've got two questions the first is what would the breakeven run rate be for AirBar?

Well, can you concretize your question a little bit more?

Well, how many units do you need to absorb the factory overhead, what's the breakeven run rate?

Yes, this is very important to explain. When it comes to the AirBar and a module, what we're doing, I mean we're not talking about the way manufacturing would usually be done in China and so forth. We're doing this in Sweden. It's a very highly automated manufacturing process, with state of the art equipment. Where you just need two or three people to run the line or to manufacture the units there. And the capacity of this production facility and equipment are on some 400 square meter area and you can have an output capacity from that area on a full year run rate of 5 million units. The overhead in this one is not so big, but naturally you can say that they are quick equipment costs and so forth that you need to set. Volume is naturally an important driver of the cost per unit, the direct cost per unit which you will have.

Okay. Switching gears, could you update us on any use of your product in laptops, specifically status with Dell?

Can you repeat that question I didn't hear you so well?

What does the market look like with putting your touchscreens into, built into laptop computers and in general and could you give us an update on where things stand with Dell?

Yes, we - as we said earlier we have a little bit different solutions now for the PC market. First of all for the larger screen type of displays we have a solution called zForce Plus which is a multi touch module that goes into Monitors and All-In-One PCs. We have on the roadmap also our AirBar module to work with larger displays. So for that category of products, we have a solution. And then for notebooks we have our AirBar product which is possible to install in aftermarket products of PCs that are already in the market. But also the PC OEMs can build AirBar into their devices as an embedded module. So we have a solution both for the current market that is about 500 million devices and also for the yearly volume of new notebooks. And if you look at the notebook market it's really - most of the notebooks that are sold today are without touch. So it's a fairly small market for the built-in sensors today. Approximately 10 percent of the notebooks have touch. So we are now looking at that market as well, but the most interesting market for us is the market that's without touch. And then if you go into a specific development with these OEMs, we are doing development with Dell for example and it's going according to plan. It's a little bit delayed. We were expecting some products to be available in the market but unfortunately that hasn't happened yet. But it is still in development. For the other OEMs we are currently working also on other implementations with AirBar for that category of products. Also to sell our products through their online stores as accessories, so it's possible that you -- when you go in and buy a notebook online you can also buy this AirBar sensor as an accessory, like you would buy a keyboard or a mouse.

So, do you have any commitments from OEMs to have a slot where the AirBar could be inserted?

Yes, we're already discussions with several of these companies to do that. We’re also looking at the opportunities now with the new Windows 10, where basically you can, there are some companies doing these kind of a notebook cases, which is basically just a display. And you connect that to your mobile phone and that device can be equipped, obviously, with or without touch. So we're looking at that opportunity, but if you look at it, the most interesting part of the market is the one without touch, because that's where the volume is. And this market with all the PC OEMs it’s maybe 50 different notebooks on the market and most of them doesn't have touch it's a very fragmented market, and getting into all of these devices with a fairly small market is not so interesting for us. So we're looking at the aftermarket products and the products without touch. That's our primary targets.

OK, I see. Thank you.

Our next question comes from Mark Weber, private investor. Mark your line is open.

What did Autoliv contribute to NRE revenues in quarter four?

Okay, Mark can you hear me. So yes the Autoliv, and I guess you know the whole, sort of the whole package around Autoliv, you can call it the first phase with Autoliv agreement which was the 1.25 million initial payments non-refundable and a 1.5 million that was related to a number of milestones. So far we have achieved those milestones and in the fourth quarter we recorded one quarter of the initial payment, which was down to 375,000 and we also recorded the second milestone of US$500,000 related to the development project in the joint development agreement. So in total $875k. Plus revenues related to OEMs that in parallel is working with us and Autoliv for testing the steering wheel this year that we already have developed, and have it being tested on a type of test vehicle.

So how many quarters of the 375k are left and then there's one more milestone payment left is that correct?

That’s correct it’s one 375k and one 500k left.

Okay. And could -- I have one more question, could you talk a little about the NN1002 and then NN1003 chips like are those in production and do you -- could you just provide a little bit of colour about what markets those address?

Yes, we currently have the NN1001 which, was our first chip that is in production obviously. Then we have the [inaudible] which is an automotive version of our first chip that is in production and goes into to the automotive market. We still have the NN1002 which is in mass production, and it's a consumer version of the NN1001 and that is primarily for low cost devices like printers and smaller displays. The NN1003 that we developed is something that addresses the larger display market, but also AirBar devices because we require a much faster type of controller to run that technology. So the NN1003 is for AirBar devices and for single side sensors that we do also for smaller displays. And it makes, for example, on a notebook and for a quite large display we only have one single chip working the whole display. This makes an AirBar for notebooks a solution that becomes extremely cost effective.

All three chips are currently in production (of four) I guess?

Yes, all three.

Great, that's all I have. Thank you.

And this concludes our Q&A session for today, I'll hand it back over to Lars for any closing remarks.

Yes, I just want to say, thank you for joining us on this call, and have a good day everyone. Thank you.