Hi, and welcome to Neonode’s Q2 2022 Earnings Call. Today, we’ll start with the with company presentation, which is then followed by questions-and-answer sessions led by me and the other covering analysts. And the analysts are welcome to dial-in after the company presentation to ask questions. And with that said, I leave over to the CEO of Neonode, welcome, Urban Forssell.

Thank you, Jesper, and welcome to this second quarter 2022 earnings call also from my side. I’m sorry, for a slight delay that we have in this call, it was due to a minor technical issue, which normally solved, hopefully. So you can all follow this with good quality. Today, joining me in this presentation is our CFO, Fredrik Nihlen, and I will just in a minute give the word to Fredrik. But before we go into the main part of the presentation, I would like you to take a moment and read the following legal disclaimer. This presentation contains and the related oral and written statements of the company and its management may contain forward-looking statements. Forward-looking statements include information about current expectations, strategy, plans, potential financial performance or future events. They also may include statements about market opportunity and sales growth, financial results, use of cash, product development and introductions, regulatory matters and sales efforts. Forward-looking statements are based on assumptions, expectations, and information available to the company and its management, and involve a number of known and unknown risks, uncertainties and other factors that may cause the company’s actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements. I also refer all viewers of this call to see our official filings with the SEC that are available through neonode.com. Prospective investors are advised to carefully consider these various risks, uncertainties and other factors. Any forward-looking statements included in this presentation are made as of today’s date. The company and its management undertakes no duty to update or revise forward-looking statements. This presentation has been prepared by the company based on its own information as well as information from public sources. Certain of the information contained herein may be derived from information provided by industry sources. The company believes such information is accurate and that the sources from which has been obtained, these information are reliable. However, the company has not independently verified such information and cannot guarantee the accuracy of such information. Thank you. And with this, we move on to the main part of the presentation and we have a short agenda today and Fredrik please come up and present Q2 2022 financial results.

Thank you, Urban. We – I will summarize the financial results for Q2 2022, and you can find the details on our webpage neonode.com under Investors section and in our 10-Q. Revenues – total revenues for the Q2 2022 was $1.3 million. That is a decrease of 26% year-over-year. License revenues decreased this quarter due to mainly that our customers has component shortages and cannot produce products with our technology and hence, we get lower revenues. Our product revenues was $0.2 million in Q2 2022. That is a decrease of 39% year-over-year. During 2021, we saw an increase in demand for products or TSMs, and they were included in retrofit solutions. During 2022, we still are impacted by the lockdowns due to COVID-19. And we can also see that product developments, new product developments take longer time sometimes up to 18 months or longer that impacts our products revenues negatively. Our gross margin is 56% in Q2 2022 and that is an increase of 17 percentage point year-over-year. And if we look at adjusted margin for TSMs, we can see an increase and then positive trend. The 56% are based on low volumes and we expect that we have – will have some push down when the larger volumes will come. Our operating expenses was $2.8 million in Q2 2022. That is a decrease of 14% year-over-year. It’s mainly due to lower staff expenses, but also lower depreciation and amortization costs. This gives us a result for Q2 net loss of US$1.5 million compared to US$1.7 million for the same period last year. Coming to cash, we had a net cash burn of $2.9 million in Q2 2022. That is an increase quarter-over-over of 29%. For the first half of 2022, we invested in our inventory to secure production of our TSMs, we don’t expect to have any more large investment in inventory during the rest of the year. That gives us a cash and accounts receivable balance of $13.5 million as of June 30, 2022. And with that, I will leave it over to you again, Urban.

Thank you. I will share some insights into our corporate strategies and also our current business development activities that we are focusing on in the company. Let me also say this, that also from my side, I think sales and the overall results for second quarter this year are below expectations and we work hard to change this in the coming quarters and the coming years. And we believe that overall our business strategy is sound and is the right one. And those are you that follow us and have joined the previous earnings call, you will recognize some of this. But our business model rests on two pillars, technology licensing, where we work with two technology platforms, one called zForce, which is a advanced optical technology platform suitable for touch, gesture sensing, and object detection applications. And the second platform we are working with is called MultiSensing. It’s a software platform for scene analysis that we are, for instance, applying in automotive applications for driver and in-cabin monitoring. For the licensing business or the solutions business, the target is clearly on two segments printers and automotive. These are our focus segments for this business. The second pillar is product sales, where we today offer a range of touch sensor module products and I will describe them later. They are actually based on the zForce technology. So there’s a link between our licensing business and the products business through the technology in this case. Here the focus is clearly on the elevator interactive kiosk segments. And we believe that these two individually and together form a good basis for the company and will Payway and enable us to grow and return to profitability and positive cash flow in the years to come. In 2020, 2021, we developed overall strategy for…

Thanks for that Urban and Fredrik. So we’ll start the Q&A sessions or the Q&A session with a few questions from my side. And then we’ll take additional questions from other analysts. So regarding your product segment, it seems that, I mean, COVID lockdowns are obviously hindering your business there, but could you just on your main or largest projects, could you just give us an update there?

Again, I repeat that we work in elevators and interactive kiosks. In elevators, we have had good success in the first years to secure customers and partner developing retrofit solutions. What we are now working on and seeing that we have more than two, let’s say it like this elevator OEMs developing like new equipment solutions including our technology and they are quite different. And it’s interesting to see. On the other hand, this is a case some of the major elevator companies, they are slow. They are big industry groups. They tend to be slow. They are meticulous in their development and testing, and before they release something to public, it’s all double checked and triple checked. So slowly but steadily, I think we are getting there. We are growing the market share for retrofits, and we are starting to dig into the new equipment part of that market. For kiosk, it has also been a race in the previous two years with retrofit solutions, but here we have a more fragmented market segment than elevators, extremely fragmented, I would say. And we see both retrofit and OEM in Asia. We are actually happy to announce. And also in Europe, we have a couple of examples where we have big OEM customers doing now their own retrofit, but also in parallel developing for the next generation of the same products, integrated solutions. And some of these customers are Fortune 500, if not Fortune 200 companies. So it’s really good to see and that encouraged me. For instance, I went to see some of these customers in Japan before the summer. And it was really impressive to see their development work and what they have brewing. And we hoped, and we are, of course, encourage them to speed up and launch this now because it – if some of these big names come out with new products featuring our TSMs, we think it will have a positive effect also on other discussions we are having.

All right. So it’s basically a quite a broad range of customers that you’re waiting for to turn into volumes.

The – it’s overall and it’s always the same story. You have to be focused and be persistent and work hard, and then some are close to launches and some are further away and it’s a whole spectrum. Also, you remember, we talk about both elevator and kiosk market in using a pyramid picture. And at the top in the elevator and in the kiosk space, there are a few, but very large. And of course, we want to enter with these, but on the other hand, they are more cautious. They don’t move so fast. They want to wait and see. And they are evaluating and observing also market trends. So this is the situation we’re in. We knew it, of course, up front, we are doing everything we can to push them, to motivate, to inspire, show other examples. And we are here very much supported by our different partners and the existing customers, because we are all having the same objective with this and we are working well together, I would say.

All right. So let’s move on to driver monitoring procurements. I mean we know that there are a lot of procurements where design wins are kind of starting to be awarded now a big wave of this. How – could you tell us anything about the attraction that, that you’re seeing any like design wins on the horizon?

So yes, we have, and we are a late entrant to this market compared to some other competitors. So in some cases, it’s already clear, other suppliers have already been nominated. But what I think we are seeing, and what we are riding on right now is sort of the second wave and this fits in with our strategy from the beginning. So we have developed a software platform, which is very, very flexible, easy to adapt to different requirements and combine, for instance, driver monitoring with in-cabin monitoring, different in-cabin monitoring features with the same solution and adapt very quickly. And the resulting code is super efficient. So now, even OEM customers and Tier 1s that have already sort of decided, when we approach them and show a little bit what we can offer them, we get often very, very positive response, because they have tried other even well known and highly praised solutions from others. And they’re not happy for whatever reason. And then in some of these cases, we are then hook latching on and starting to have a growing relationship and developed and concepts and solutions.

And so when in time, like, are those procurements that you are participating and I do.

So that’s – it’s different. I think we believe we have some this year and we will have also some chances next year. And the launch is later on, depends on their product launch plans, but it’s a few years out unfortunately, but that’s the way the automotive industry works. So you have to work through all the development step and test and validate your solution in parallel to the whole vehicle platform being developed and then they launch it. But we remain very positive about this. And then we think we have a very say high customer value solution. And it’s also technically very nifty, so we are quite enthusiastic.

All right. Sounds promising. So one last question to Fredrik, there’s been a lot of macro uncertainties both regarding like inflation and also big FX movement. Does this impact your businesses in way or – and if so, how?

Well, short-term inflation will not impact us. We have secured the inventory to produce our TSMs. Of course, we can perhaps see a bigger push next year for employees that say that inflation is high and we want salary raise also. But overall, I don’t think that is the main issue, but we can see a main impact is in the currency effect because our cost base is basically in SEK in Swedish Krona. And when the SEK is weakened, when we consolidate it into the dollars, well, we get the lower cost base. So that is the main thing.

All right. So basically that your cash, which is in U.S. dollars, that will last a bit longer.

Yes.

All right. So that’s all questions that I have. So now let’s see if we have – we don’t seem to have any other questions from external analyst as of now. Okay. Then, that concludes this Neonode Q2 conference call and thank you all for watching.

Thank you.

Thank you.